COMPARATIVE ECONOMIC

PATTERNS OF VILLAGES
ACROSS INDIA

SUBMITTED BY:
Mohd Ashfaq
BA Economics (H), 17BA032
9th April, 2020
Introduction
India is predominantly a rural country with two third population and 70% workforce
residing in rural areas. Rural economy constitutes 46 per cent of national income. Despite
the rise of urbanization more than half of India’s population is projected to be rural by 2050.
Thus, growth and development of rural economy and population are a key to overall growth
and inclusive development of the country. Traditionally, agriculture is the prime sector of
rural economy and rural employment. The transition in composition of output and
occupation from agriculture to more productive non-farm sectors is considered as an
important source of economic growth and transformation in rural and total economy.
However, no serious attempt has been made to analyze and understand the transition in
India’s rural economy. Economic studies on rural India have focused mainly on changes in
rural employment, by gender and at broad sectoral aggregation between agriculture and
non-agriculture.
However, steady transition to urbanization over the years is leading to the decline in the
rural share in population, workforce and GDP of the country. Between 2001 and 2011, India’s
urban population increased by 31.8 per cent as compared to 12.18 per cent increase in the
rural population. Over fifty per cent of the increase in urban population during this period
was attributed to the rural-urban migration and re-classification of rural settlements into
urban. Population projections indicate that India will continue to be predominantly rural till
the year 2050 after which urban population is estimated to overtake rural population. It is
often felt that unplanned rural to urban migration, particularly in search of better economic
opportunities, is putting severe pressure on urban amenities and forcing a large number of
low wage migrants from rural areas to live in unhygienic and deprived conditions. Thus, to
check unplanned migration from rural to urban areas and to improve socio economic
conditions of vast majority of population in the country, there is a need to make rural
economy stronger and create employment opportunities in rural economic activities. The
improvement in economic conditions of rural households is also essential for reducing the
disparity in per capita rural and urban income which has remained persistently high. This
requires significantly higher growth in rural economy as compared to urban India.
Traditionally, agriculture is the prime sector of rural economy and rural employment. The
transition in composition of output and occupation from agriculture to more productive
nonfarm sectors is considered as an important source of economic growth and
transformation in rural and total economy. Several scholars have observed that such
transition is taking place in Indian economy, but at a very slow pace.
A Shifting tendency
India’s transformation over the last half-century has had a profound effect on its villages.
This includes rapid population growth for much of the period, zamindari abolition in the
1950s, the expansion of irrigation and the green revolution in the 1960s and 1970s, and the
acceleration of the overall growth rate, together with the liberalization and opening of the
economy in the last two decades. The last three decades in particular have seen a recasting

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of the structure and growth of the Indian economy. The “Hindu” rate of growth of 3.5%,
together with a population growth rate of over 2%, over the period 1950-80, has long gone,
with growth rates of the economy moving to 6% per annum in the 1980s and the 1990s and
the annual population growth rate now down to 1.4% and falling. The biggest acceleration
in economic growth occurred in the post 2003-04 period with growth rates averaging more
than 9% making India the second fastest growing country after China. While the opening up
of the economy in the early 1990s was surely a catalyst, the subsequent growth in the
present decade is also driven by the surge in investment rates. What is also remarkable is
the resilience shown by the Indian economy in sustaining a strong rate of growth, despite
the severe global slowdown. The break in trend in growth rates in the early 2000s does not
look like an aberration, the underlying drivers suggest a sustained movement towards a
higher growth trajectory. From the perspective of a village, it is important to understand the
sectoral composition of the growth rate and the possible linkages with the changes in a
village both in terms of giving insights into this national growth process from a very micro
level and also understanding the changes in a village. It is important because the period of
acceleration in growth rates in the Indian economy has also been a period of increasing
inequalities along some dimensions. In particular the income of the top decile appears to
have grown rapidly as does the share of profits. In the 1980s and 1990s some of the poorer
states were growing more slowly. However, in the last two decades, there has been relatively
rapid growth in incomes of the bottom two deciles and in the last 6-7 years relatively rapid
acceleration in the growth of the poorer states

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Emergence of New towns
New Census towns are those towns which were villages in the previous census, while by
definition, CTs are those towns which have attained the census laid three criteria of
minimum population size, minimum population density and minimum percentage of male
main non-farm workers to total male main workers but are still governed by the rural
panchayats. But for conducting population census, new CTs are identified well ahead of the
enumeration of population. Therefore, to select the settlements for new CTs, the
aforementioned criteria are applied to the villages of previous census. At the macro level,
emergence of new CTs is by and large the factor of increase of rural non-farm workforce in
the big village. In census 2011, the number of new CTs has increased considerably as
compared to other censuses and majority of them are located away from the existing cities.
This locational pattern implies that the major impetuses of rural transformation came from
inside the villages rather than outside.
Rural Transformation at macro level
Rural transformation refers to the metamorphosis of the economic, social and spatial
structure of the villages and also the way of life of the villagers through multiple processes
which include changes in the structure of the production system, livelihood diversification,
rural–urban linkages, infrastructure development, educational attainment and changes in
the aspiration and way of life and many more. There are two types of factors namely
exogenous and endogenous which influence the process of transformation. While the former
includes land reforms, infrastructure development, innovations in agriculture, rural-
industrialization, etc., the latter encompasses different types of village-level institutions,
nature of soil, access to water for cultivation, method of cultivation, cropping pattern, pattern
of land ownership, etc. So, from the definition it is crystal clear that rural transformation is a
complex process and it has multiple dimensions. However, since long the processes of rural
transformation have been portrayed as deterministic and unidirectional where economy
becomes predominantly industrial from agricultural which leads to significant the
improvement in the level of living and as a consequence of this transformation ‘rural’
becomes ‘urban’. However, such unidirectional process has been challenged by scholars and
they have argued in favor of the heterogeneous nature of rural transformation. Evidences
from many developing countries including India show that in the wake of transformation of
the rural economy, almost everywhere the importance of agriculture is declining. however,
that does not necessarily mean that the rural economy is taking an industrial turn. In fact,
there are multiple types of non-farm activities other than industrial activities where people
are engaging themselves. These activities range from petty trading to large-scale trading
Thus, occupational diversification owing to the structural transformation has different
implications for different households/workers. It is a ‘strategy of further accumulation’,
‘strategy of consolidation’ and ‘strategy of survival’ for the rich, middle class and poor,
respectively. Furthermore, it is important to note that while an increasing proportion of rural
workers is venturing into non-farm activities, it hardly means that they are quitting
agriculture.

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Another contention that with rural transformation village becomes ‘urban’ has also faced
bitter criticism. This view implicitly accepts the notion of rural–urban dichotomy which no
longer has any theoretical as well as empirical significance in the discourse of regional
development. Empirical studies done in different parts of the world in the last three or four
decades have argued that due to the substantial growth and improvement in transport and
communication technologies in areas located away from the city cores, physical, functional
and cultural integration between ‘rural’ and ‘urban’ areas have occurred in an
unprecedented way. As a result, ‘ruralization of urban and urbanization of rural’ have been
taking place. Recently, urban theorists have challenged the idea of ‘urban’ as ‘a fixed,
bounded and universally generalizable settlement type’ and ‘rural’ as a ‘residual’ category.
They have argued urban as ‘an uneven historical geography’ and ‘rural’ as ‘the constitutive
outside of the urban’. Further it is argued that the processes of urbanization (or rural
transformation) are old and incomplete and importantly today’s urban question is today’s
agrarian question. So, the foregoing discussions indicate that rural transformation has
several dimensions with varied outcomes and likewise ‘urban’ contains heterogeneous
forms, But the transformation of workforce from agriculture to non-agriculture plays the
most important role.
Employment
when the growth rate of overall employment in India has been declining, employment
growth in agriculture has been sluggish or even negative and the scope for migrating to cities
and find employment in the organized sector has been dwindling. Therefore, it is not
erroneous to believe that impetuses for the growth of rural non-farm employment are
coming from the rural areas themselves. Cost-saving-technology-led growth of agricultural
outputs makes way to increase the income of large farmers who in turn demand more and
more consumer goods and services and invest in nonagricultural production. As a result,
consumer goods industries and service-related production activities proliferate which are
labour intensive in nature and in turn create employment in rural non-farm activities. Critics
have several objections to this as they argued that it is possible that affluent farmers sell their
marketable surplus production and buy consumer goods and different services to the higher
order markets bypassing the local ones. Furthermore, people may not invest in the local rural
market if it has adverse climatological condition, economic insecurity and meagre local
production facilities. An opposite view is that due to agrarian distress people are compelled
to switch over to non-farm activities which are of ‘last-resort’ type. However, it is important
to note that there are a number of economic as well as socio-cultural factors such as
availability of credit facility, influx of capital in the form of remittance, per capita land
ownership, level of education, gender, caste, etc. which make the transition of workers from
farm to non-farm sector and the nature of their non-farm jobs more complex than what the
aforementioned two theories suggest. For example, in the case of agrarian distress, male
workers from the households with small and marginal land holdings are more likely to enter
into the rural non-farm sector than others. Similarly, even if the growth of rural non-farm
employment is driven by the agricultural prosperity, the quality of non-farm employment

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varies greatly according to the social groups to which the workers belong. In this theoretical
backdrop, empirical studies reveal that impetuses for the growth of rural non-farm
employment vary over time and space. Because of greater spatial diffusion of green
revolution, agricultural growth and productivity were high in the 1980s.
In 1980s several regions, agriculture acted as a positive factor for the growth of rural non-
farm employment while in other regions it became a push factor for the same. However,
things were changed in the following decade. By the late 1990s, in addition to the continuous
downsizing of operational holdings and marginalization of cultivators (due to mounting
population pressure on land) and frequent crop failures in rain-fed agriculture, agrarian
scenario in India faced several challenges which are as follows.

• Due to the over-exploitation of ground and surface water, irrigated agriculture faced
a deep-water crisis.

• Efficiency in input use in crop production was declined greatly. As a result, the ‘seed-
fertilizer technology’ of the Green Revolution was no more cost-efficient.

• Following the structural adjustment programs, there was a huge cut in the
agricultural subsidies which resulted in the sharp increase in paid-out cost of farming.

• Terms of trade for agriculture became stagnant.

• Because of the same reason, priority lending was squeezed.

Furthermore, the contribution of the rural cooperative credit institutions in respect of credit
distribution could not reach up to the expected level. As a result, for credit, a considerable
proportion of farmers had to rely on moneylenders who charged high rates of interest. As a
combined effect of these challenges, not only the agricultural growth rate declined but also
the farmers, especially the small and marginal ones, became pauperized.

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Emerging Classes
On the basis of livelihoods, the town has three major classes, cultivators, labourers and
entrepreneurs. In recent times a class of service men is emerging which is spearheaded by
the school teachers. These service men are not native and have settled here from out sides,
most of whom have come from villages. They have chosen small towns because of the four
main reasons:
• land value and cost of living is much lower than those of small and medium cities;
• Comparatively better facilities available for schooling of their children than those of
typical villages
• It is easy to commute to their places of work by buses or by their own motor bikes;
• All the goods and services for daily needs are available from the local market.
In fact, English medium school, marriage hall, private nursing home, etc. have been set up
following the demands of this emerging middle class. However, we should not forget the
growing socio-economic inequalities in the CT. On the one hand, newly settled service class,
successful entrepreneurs and big cultivators are representing the upper stratum of the social
echelon and are demanding better services from the panchayat, while on the other hand,
growing agricultural laborer community, small and marginal farmers, share croppers, self-
employed non-farm workers, construction workers, etc. who are the majority of the town’s
population belong to bottom strata of the society and better employment is their first
priority rather than better services. Private hospital, private school, marriage hall, etc. have
no value to them. Abundant kuccha and semi-pucca houses along with modern buildings
carry the symbol of huge economic inequality.
Health, Nutrition and Gender
The increases in economic prosperity have been associated with improvements in human
development outcomes in villages in the last 25 years. last 25 years have seen improvements
in access to health services and improvements in nutritional status of children as well as
adults. Compared to the national average or the state average, malnutrition among children
in villages appears to be on the high side. However, a comparison of nutritional status of
children by caste and economic status also suggests large inequalities. However, there is
also clear evidence that richer 26% households have on average lower percentage of
malnourished children compared to poorer households (measured by asset quintiles or land
owned). Some of these issues are also issues on which there has been slow improvement
nationally. Qualitative discussions have shown that forced reliance on private expenditure
on health continues to remain an important source of vulnerability for poorer households.
The vulnerability of poorer households to such shocks with many of them falling into debt
traps after a major illness of a family member. The relatively low improvement in supply of
health services such as public health centers has also meant low improvements in
institutional deliveries

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However, there is little evidence to suggest that the status of women has improved radically
with increased incomes. Women continue to remain neglected in a society with low access
to education and health. Problems with the empowerment of women are manifested in the
very low participation of women in the labor market. Historically, Villages did not have many
women participating in the labor market. Of those who do participate in the labor market,
these mostly belong to the lower castes. However, regular employment such as school
teachers, anganwadi workers and ASHA (Accredited Social Health Activist) are still cornered
by upper caste women.
Government Institutions
Some of the external stimuli such as the opening up of markets, access to outside jobs and
greater connectivity and communication have also affected the functioning and evolution of
village institutions. On social and political dimension, there is some evidence of a changing
institutional response. While some of the existing institutional barriers such as patriarchy
show some sign of weakening with greater participation of women in higher education, it
has also seen strengthening of participative and collective action for the common public good
of the village. This has been mediated through various forums including the Panchayat,
partly a response to internal dynamics of the village with greater participation of lower
castes in the political process but also through external factors such as the emergence of
caste based political parties as a strong political force in the states. There has also been a
significant increase in the spending by the central and state governments on education and
health. However, the increased spending has not yet materialized into corresponding
improvements in schools and public health facilities. While the number of class rooms has
increased, the number of teachers in the village primary schools has come down. The quality
of teaching in the school leaves much to be desired. Similarly, the Anganwadi has never been
functional in few villages. The village Anganwadi workers sits at the primary school but there
are very few pre-school children present. We have also not seen any reliable and systematic
effort to provide supplementary nutrition to pre-school children in villages. The most
ambitious programme of the central government, MGNREGA was initiated but hardly
functioned in the initial months of its implementation. For almost six months, the PDS shop
in few villages were closed because of corruption charges against the PDS dealers. What was
also unfortunate was that there was no effort to maintain even the existing institutions. The
seed store and the cooperative bank in villages were important institutions and played a role
in the green revolution. Some of these problems were related to the failure or absence of
collective efforts by the village community.
Where it ends?
The recent high growth rates in the Indian economy have generated considerable attention.
In addition to the issue of the sustainability of such growth, there has been a question as to
whether this growth is also shared by rural India, still home to almost three quarters of the
population. The basic story of villages over the years, and in particular the last three decades,
has been a story of continuity with change. The continuity is in terms of the primary drivers

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of change which have remained population, technology and outside jobs. However, there are
very important elements of change in the way these factors have influenced the villages,
including the growth of incomes and the way institutions have responded to these forces
including in land and labor markets. Population growth continues to exert pressure on the
resources of the villages. However, this is less intense primarily because of the mobility of
the villagers. Some have migrated out, in greater numbers, but also the population has been
able to avail itself of the opportunities outside the village. The second factor has also
contributed in taking away the pressure from land and agriculture. Even though, the land
owned by the village residents has declined, yields per hectare have seen substantial
improvements, the tenancy market has adapted itself to the new challenges with no decline
in the absolute area under tenancy. Along with the intensification of mechanization, the
introduction of new crops and the integration with outside commodity markets have
brought benefits to the farming community, but this has also made them vulnerable to the
volatility of international markets. The increase in non-farm employment opportunities has
also meant that the labor market is no longer dependent overwhelmingly on agriculture and
while mechanization and technological change are leading to a decline in labor demand in
agriculture, wages continue to increase. The access to outside jobs and markets has also been
a factor in changes in the distribution of income and changes in the social status of different
caste groups. While the poorest caste groups, remain at the bottom of the caste hierarchy,
there is evidence that they have gained socially and economically as a group. But even
though, they have seen improvements in their social and economic status, overall inequality
in the villages has continued to increase similarly to national trends. This appears largely a
result of increasing inequality within caste groups despite decline in inequality between
groups. Notwithstanding incomes increasing and institutions adapting to economic changes,
there has not been strong improvements across the board in human development indicators.
Literacy has increased strongly and there has been significant improvement in school
enrolment. We should emphasize, however, that these are largely driven by increase in
demand. On the supply side, there seems to be some deterioration of the school and quality
of teaching. Other public services such as the Anganwadi and health services hardly function.
Existing institutions such as the seed stores and the cooperative banks are no longer
functional. However, some of these problems appear to be temporary and with the change
in village headman, there is some improvement in the quality of public services.
Overall, villages over the last three decades shows a mixed picture of change and continuity.
Understanding the nature of change can make a powerful contribution to our understanding
of the nature of development processes in the rural areas of the country. Such understanding
is also important, in turn, for understanding of the structural responses and bottlenecks for
the sustainability of growth in the country as a whole.