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The Indian Economy : a Lame Horse
Without the Support of Rural India
Vilasini G. Patkar,
Downloaded From IP - 117.204.71.230 on dated 30-Aug-2010
R.J. College, Ghatkopar (W), Mumbai

Sanjay S. Kaptan,
Members Copy, Not for Commercial Sale
Dept of Commerce and Research Centre, University of Pune

www.IndianJournals.com
Rural reconstruction is an important task before the economic planners of

India. The author takes a stock of measures adopted by the governments
through planned policies and strategies and suggests measures to be
undertaken for overcoming the dismal scenario of a so called developing
economy. Rural Bharat has to be brought at par with Urban India. In achieving
this goal the Corporate, the NGOs and the educated masses should function as
‘Social Change Agents’ to transform the vast rural expanse into modern
developed India. Only then we can experience a galloping Indian economy.
1 Introduction
Gandhiji had said ‘India lives in Villages’ and this is true even dotay. The
idea of village self sufficiency has received great deal of attention from social
scientists and plociy makers over the period of years. The reason for this may
be political, academic or even human considerations. In fact, the problem of
improving the lot of our population that lives in rural areas has assumed greater
significance because of its explosive nature which is threatening our very
existence. The present approach is of inclusive growth strategy which implies
that we cannot visulize development of our economy unless we incorporate the
25
26 Journal of Commerce and Management Thought / January 2010
development of our villages and living conditions of the poorest of poor people
residing in those villages under the broad strategy of globalization and
economic development.
Table No. 1 : Distribution of Villages in India (2001)
Population No. of Villages % of Total Village
Less than 200 1,14267 17.9

200-499 1,55,123 24.3
500.999 1,59,400 25.0
1000-1,999 1,25,758 19.7

2000-4,999 69,135 10.8

5000-9,999 11,618 1.8
10,000 and above 3,064 0.5
Total No. of Villages 638365 100.00

Source : Source www.censusindia.net
According to 2001 census, India has a population of 1029 millions, of
which 741 millions i.e., 72.2% reside in the rural areas, constituting of 6,38,365
villages. In 1990-00, 26.1% of our population lived the below poverty line. The
percentage / number of people in rural areas living below the poverty line were
much higher. They have been subjected to economic deprivation,
discrimination and oppression of the worst kind, of all types. Development of
rural areas has been one of the concerns in the various Five Years Plans. The
gains of various programmes primarily occurred to the upper strata of the rural
society. Hence, in the recent years the government is committed to the
philosophy of social justice and socio-economic development of the rural
areas, with a concentrated focus on the poor and needy people.
Vilasini G. Patkar, Sanjay S. Kaptan / The Indian Economy 27
Table No. 2 : Rural and Urban Population : 1901-2001

Census Year Population (Million) Percentage of Total Population
Rural Urban Rural Urban
1901 213 26 89.2 10.8
1911 226 26 89.7 10.3
1921 223 28 88.8 11.2
1931 246 33 88.0 12.0
1941 275 44 86.1 13.9
1951 299 62 82.7 17.3
1961 360 79 82.0 18.0
1971 439 109 80.1 19.9

1981 524 159 76.7 23.3

1991 629 218 74.3 25.7

2001* 741.7 285.4 72.22 27.78
Source : Source www.censusindia.net
The census reveals that in 1901, the rural population of India was 89.2%
of the total population which decreased to 74.39% in 1991 and 72.22% in the
year 2001. This decline shows a high rate of rural exodus. Such rural migration
in on account of lack of employment opportunities in rural areas causing rise
in urban problems like slums, over crowding, power shortage, increase in
crimes, youth unrest, child labor, etc.
Although the ratio of rural population has declined from 89.2 percent to
71.2 percent during the century, it has adversely affected the poor very hard.
On the other hand the density of population has increased; land under
agriculture has diminished, affecting the forests and exodus to urban areas. The
agricultural labor continued to be exploited and the gap between the rich and
poor further widened.
In 2010 urban population is projected to rise at 42%. To combat this
phenomenon of rural people migrating to urban areas, quick action plans are
required to be undertaken for speedy rural development and generation of
ample opportunities of livelihood at the local village level itself.
2 Analysis
Rural development as a concept is not a new one. It had received the
attention of people like Gandhiji, Tagore and many others much before
independence. The problem of rural reconstruction however was concertized
by Gandhiji through the khadi movement.
In the simplest sense, the term rural development consists of two words,
viz., ‘rural’ and ‘development’. The terms ‘rural’ and ‘village’ are synonymous.
Any area classified as village as per the revenue records of the state irrespective
of population is referred to as rural. The villages have been a sine qua non of
rich cultural heritage and an embodiment of traditional Indian Society. The
vllages characterize authentic native life, having a social and cultural
distribution of its own in contrast to the urban/city life in India. The village
‘was not merely a place where people lived; it has design in which were
reflected the basic values of Indian civilization.’ (Beteille 1980-108)i

The Indian economy is dichotomous in nature, having rural and urban
facets - rural implying underdeveloped and urban characterizing developed
economy. The terms ‘village’ and ‘rural’ are synonymous. Rural is defined by
the Census of India as - ‘that area which is not urban’
In literal terms rural means rustic, homely, unpolished countrymen or a
villager who is unaware of advancements in the outside world. Rural refers to
the under developed areas of state which are not either cities or districts or town
places. Rural is differentiated from the urban in terms of geographical physical
location (interior neglected areas), less number of households who are closely
knit individuals and families, who follow traditional lifestyles/practices, who
are religious and ethical in their outlook and are fairly happy with their limited
resources and consumption because they believe in simple living.
According to the Vedic definition, “a village is an aggregate of several
families sharing the same habitation.” Villages symbolize abundance of natural
resources, which are largely unexploited, yet they are largely self-sufficient and
house a contented community. However, in reality, our villages are not
economically and socially self-sufficient because they are under developed and
gripped by poverty as their resources are not optimally utilized. Rural
reconstruction has become a very important issue before the Economic
Planners today.
India is a land of 638365 villages accommodating 72.2% of our

population. This huge area of land and people are far lagging behind in terms
of overall progress, growth and development. The three basic problems faced
by the people living in the rural areas are :
● Backwardness
● Widespread unemployment and
● Massive poverty
Steady and progressive measures were adopted by the government of
India over the period of years, through planned strategies and policies to
improve the quality of life of rural citizens. The main emphasis of planning was
‘growth and development with equity’. The new economic policy of 1991 also
emphasized on the funding for rural development. The Indian government

spends around 6% to 7.5% of its GDP on the social sector, which includes
expenditure on social services and rural development. The planned allocation

for rural development in 2005-06 budget is Rs. 18,334 crores and on subsidy
for fertilizers, the estimate is Rs. 16,254 crores. The estimated expenditure on
health and family welfare is Rs. 10,280 crores. In recent years the government
expenditure on the social sector has been rising. This is a positive trend that
will facilitate rapid rural development.
However, the rural areas have not significantly improved - considering the
Government efforts through schemes and fund allocations since independence.
The development is visible in the urban areas, a few sectors and only in certain
regions of the country. The concentration of development in the urban area has
given vent to a wider regional disparity. The urban-rural divide has become a
cause of concern for the academician, economists, researchers, social activists,
politicians and industrialists.
Rural India is predominantly agrarian in nature. Planned agricultural
development was the thrust area for developmental programmes. Various
progressive and scientific measures in consultancy with research institutes like
CSIR, BARC, TISS, TIFR, were implemented over the years to increase the
agricultural production so as to provide adequate food, employment and
income to rural people. Measures such as improved irrigational facilities, good
quality seeds (HYV), fertilizers, pesticides, Integrated Rural Development
Programme (IRDP), financing facilities through banks and financial
institutions to farmers, technological appliances for farming, subsides on
agricultural implements and inputs, free electricity, etc. were used to increase
land productivity. However, it is found that the growth in agricultural

production was not phenomenal.
One of the reasons being, the relative importance of agriculture in total
economy has declined considerably from 56% to 29% during 1950-51 to 1995-
96. During the same period the importance of industry; trade and transport had
increased from 15% to 29% and 11% to 20% respectively. In the year 2003-04,
the importance of agriculture had further declined to 21%. Naturally, such a
low rate of agricultural progress cannot ensure rural prosperity. Unless
agricultural growth is improved (the growth rate of agriculture in the last 10
years has been less than 1.5% p.a.) one cannot achieve annual GDP growth of
7% and reduction in poverty. Industry and Services may also not grow on
expected lines without agricultural growth. Moreover, the higher rate of growth
in other sectors of the economy might further widen the already wide rural-
urban disparity. Hence, the resources have to be diverted and invested for
industrial and trade-transport development in rural areas, to make the rural

economy prosperous.
In terms of employment scenario, in the year 2000, 365.9 million persons
were employed in India (26.5% of them were women). Agriculture constituted
59% and industry 16% of the total employment in India. This means
agriculture, which is not the main income-generating source, provides
maximum employment. In other words, it is a clear indication of disguised
unemployment. At the same time statistical information reveals that in the year
2000, 10.5 million persons were unemployed in India, i.e., the rate of
unemployment was 2.8%. A poor country like India cannot afford to have so
many million people unemployed. It reflects on our poverty. A high percentage
of rural people are below the poverty line as compared to the urban population.
In 1993-94, 25.60% of the urban masses and 32.11% of rural people were
below the poverty line. Similarly, in the year 1999-2000, 21.9% of urban
population and 26.93% of rural population were below the poverty line. As per
the estimates of 1990-2000, as many as 260 million people in India lived below
the poverty line-this is an unhealthy situation. Therefore, prompt measures have
to be devised to improve employment generation in order to overcome poverty.
Another glaring feature of underdevelopment is illiteracy. Compared with
other developing countries, India has a very low literacy rate of 58% in 1999,
whereas it was 98% in South Korea, 93% in Hong Kong, 95% in thailand and
83% in China. Despite the priority accorded to education in several plans, the
average rate of literacy at the national level is still 65%. Female literacy is even
lower, around 54%. Female literacy in rural areas is only 47%. Poverty induces
children to work rather than seek education. Naturally, with such a literacy
level, what progress can we expect? This shameful scenario is due to a very low
budget expenditure of the governemt on education. The combined expenditure
(planned and non planned) of central and state government on education, sports
and youth welfare declined from 3.06% and GDP in 1990-91 to 3% in 1998-99
and further to 2.98% in 2000-01. The 2004 budget appropriate a 4% provision
for education and the allocation for education in 2005-06 budgets is Rs. 18,337
crores and for rural development the allocation is Rs. 18,334 crores.
Similarly, the expenditure on public health and water supply has been
quite less. It was 1.15% of the GDP in 1990-91, which marginally increased to
1.17% in 1998-99, followed by stagnancy in 2000-01. The 2005-06 budget sets
aside Rs. 10,280 crores as estimated expenditure on health and family welfare.
It is estimate that more than 350 million people have no access to safe drinking
water; more than 700 million people do not have access to sanitation; more
than 15 lakh children die each year before they reach the age of 1 year; nearly
50% of the children are under nourished and about 88% of the pregnant women
suffer from anemia. Unless there is graceful fund allocation, how can we
expect this state of affairs to change? Moreover, mere allocation of funds in the
budget is not sufficient, unless the concerned department is fully equipped to
utilize the funds properly. For example, departments that received higher
allocations in the year 2004-05, did not actually spend as per the allocations-
17% in case of land resources, 9% for social justice, 7% for tribal development,
4% for family welfare and 21% for all urban employment and poverty
alleviation remained unutilized. Such a mismatch of allocations and utilization
cannot generate the desired results of development.
Another distinguished feature is the character of employment and labor
market in India. In the year 2000, India had labor force of 376.4 million in a
population over 1 billion. The implied worker-population is 0.37, which is
obviously low.
The reseasons being -
● Young population of nearly 36% was below 15 years of age ;
● Labor force participation rate of adult population is also low (58.6%) of
which male is 82.1 and female is 33.9 and child labor constituted 2.3% of
total labor force;
● Labor force is largely low skilled - more than 42% had no education at all,
an average labor force participant had only 3.9 years of education, there
is male female disparity i.e., females are less skillful than males.
3 Measures
All these unique dimensions of Rural India necessitate drastic measures to
be undertaken for overcoming this dismal picture of a so-called developing
economy.
Some of the measures that can be immediately undertaken would be :
● Education to small and marginal farmers, cooperative farming and better
marketing practices in all the remote villages;
● Credit sanctioning by banks and financial institutions for all

developmental activities; Micro Financing Option;
Participation by NGOs and SHGs in making rural people aware of their

●
work opportunities;
● Change in the outlook of village communities towards life;
● Development of agro processing and agro supporting small industries
with indigenous labor intensive methods and improving the working of
village household industries.
The government machinery, particularly, the Panchayat Raj system has
not delivered the expected success in uplifting the rural community, in spite of
various plan allocations and variety of programmes launched by the
government from time to time. There, help of organizations like Khadi and
Village Industries Commission (KVIC), District industry Centers (DICs),
Chambers of Commerce and Industries (CCI), Trade Associations and Business
Organizations, has to be seeked to successfully implement the programmes of
rural development.
Basic infrastructure needs of villages such as roads, power supply,
communication linkages, warehousing and storage facilities, need based
educational programmes for knowledge, information and field development,
primary health centers, availability of quick credit facilities, etc. should be
attended to on priority basis.
Rural transformation from social, cultural, economic and political angle
has to be planned. Such a vision and broad based planned action can alone
bring about rural development. Media coverage should be utilized to enlighten

the rural masses for improving their agricultural, irrigational and industrial
practices.
Community based Organizations, NGOs and social activities could play
an important role in the transformation of the rural economy. Under the banner
of social responsibility and corporate governance, a number of companies have
also marched the rural way by adopting villages for rural development.
Some of the leading examples in this connection would be -
● The Gandhigram Rural Institute (GRI) established in 1947, in Dindigul
district of Tamilnadu, which is committed towards the total
transformation of rural India through teaching, research and extension

work. It is one of the 14 Rural Institutes of higher education started to
carry higher education to village doorstep.

● Institute of Engineering and Rural Technology, Allahabad, experimented

in intensive development of rural areas. In 1976, it set up the first Nyaya
Panchayat Level Service Centre, at Ghori, to develop a cluster of 10 to 12
villages around it with various sections for enterpreneurship training, rural
marketing, animal husbandry, banking facilities, education, technical
training, job training, medical and health centre, village sanitation project,
etc. This Institute also runs other six Nayana Panchayat Level Service
Centers.
● Research and development (science and technology) for village
entrepreneurs and for rural development is undertaken by KVIC, along
with enterpreneurship development programmes for rural people. The
primary focus of all KVIC Schemes has been on the promotion of Khadi
and Village Industries in the rural areas with the objective of employment
generation.
● The Commission for Additional Sources of Energy, GOI; KVIC, and
several other organizations, contributed to the generation of alternative
power through other sources, for the rural area usage like biomass, cow
dung, wind, solar, etc.
● Effective implementation of Community Development Projects (CDP),
IRDP schemes, Agricultural Credit Institutes, Development of
Communication, Intensive Agricultural Development Programme
(IADP), etc. should be re-enforced with proper understanding, thrust on

rural development and new optimism of bringing about positive rural
development. Team effort is necessary to make the schemes work,
because mere governemt level implementation cannot ensure results.
4 Business Organizations Participating in the Rural Development
Programmes.
● ACC - since 1944 - by setting up demonstration farms at a number of rural
places so as to practice improved methods of agriculture by the village
farmers. It encouraged the village community to develop village
industries and handicrafts to supplement their incomes. It gave
employment opportunities to a large number, including windows and
displaced persons.
HLL-since 1960s for dehydration of vegetables and manufacturing of
●
milk products, by adopting villages in Uttar Pradesh.

● Escorts, Mafatlal Group and Sugar Cooperatives have played a vital role
in rural development. Similarly Telco has developed a number of villages
near Pune, Tata chemicals developed Mithapur village into modern
Industrial Township and it has also started a leatherfactory at Devas, a
backward area in MP.
● Godrej & Boyce runs ‘swayam’ an NGO devoted entirely for
transforming the lives of the underprivileged in 25 districts of
Maharashtra and 18 states in India. It was started as an Entrepreneurship
Development Programme for the tribals in Jumpatti, a village near
Matheran-started at the behest of the Forest Department to prevent
deforestation.
● Citigroup has partnered with a bevy of exceptional NGOs like SEWA in
women’s banking, SASHA in malnutrition, Working Women’s Forum in
poverty eradication, AKSHARA foundation for children’s education, etc.
5 Conclusion
In this manner, if every corporate entity functions as the ‘social change
agent’ by actively participating in the most vital Integrated Rural Development
Programme, transforming rural India will not be a distant dream. If
organizations and individuals make rural development their mission, it will not
take much time to transform this vast rural expanse into modern developed
India.
Only when rural Bharat is brought at par with urban India, we can relish
the true fruits of development. To achieve this goal we need faith in our rural
setup, confidence in our resources both human and physical, application of
methodology that is suitable for generating employment and income and above
all-an earnest effort in this direction. If planned strategic action is set in motion,
with a strong will and determination, we can definitely achieve our long
cherished dream of rural development. Presently, the India Economy is a Lame
Horse without the full strong firm support of Rural India. Only when Rural
Bharat is brought at par with Urban India, we can experience a truly galloping
Indian economy.
References
1. Encyclopedia of Rural Planning and Development, Vol. 3, K.K. Singh &

S.Ali; Sarup and Sons, New Delhi.
2. Industry and Rural Development, R.C. Arora; S. Chand and Co. Ltd., New
Delhi.
3. Oxford India Development Report 2004-05, Kirit S. Parikh and R.
Radhakrishna; Indira Gandhi Institute of Development Research.
4. Indian Economy - Problems of Development and Planning (30th Edition)
A.N. Agrawal.
5. EPW April 2, 2005; Nov. 22, 2004; May 15, 2004.
6. Front Line, Sept. 24, 2004.
7. Competition Success Review, Jan. 2005.
8. Economic Times, March 1, 2005.
i Beteille, A (1980) : ‘The Indian Village : Past and Present’ in EJ
Hobsbown et al (eds), Peasants in History : Essays in Honour of Daniel
Thornier, Oxford University Press, Calcutta; Jodhaka Surinder S.,
‘Nation and Village Images of Rural India in Gandhi, Nehru and
Ambedkar,’ EPW, Aug. 10, 2002.

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The Indian Economy : a Lame Horse

Without the Support of Rural India

R.J. College, Ghatkopar (W), Mumbai

Dept of Commerce and Research Centre, University of Pune

Rural reconstruction is an important task before the economic planners of

Table No. 1 : Distribution of Villages in India (2001)

Population No. of Villages % of Total Village

Less than 200 1,14267 17.9

1000-1,999 1,25,758 19.7

2000-4,999 69,135 10.8

Total No. of Villages 638365 100.00

Table No. 2 : Rural and Urban Population : 1901-2001

1971 439 109 80.1 19.9

1981 524 159 76.7 23.3

1991 629 218 74.3 25.7

reflected the basic values of Indian civilization.’ (Beteille 1980-108)i

India is a land of 638365 villages accommodating 72.2% of our

emphasized on the funding for rural development. The Indian government

expenditure on social services and rural development. The planned allocation

land productivity. However, it is found that the growth in agricultural

industrial and trade-transport development in rural areas, to make the rural

● Credit sanctioning by banks and financial institutions for all

Participation by NGOs and SHGs in making rural people aware of their

bring about rural development. Media coverage should be utilized to enlighten

transformation of rural India through teaching, research and extension

carry higher education to village doorstep.

● Institute of Engineering and Rural Technology, Allahabad, experimented

(IADP), etc. should be re-enforced with proper understanding, thrust on

milk products, by adopting villages in Uttar Pradesh.

1. Encyclopedia of Rural Planning and Development, Vol. 3, K.K. Singh &

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