Unleashing Little India?s Natural Enterprise

Tuesday, October 16, 2007

The pick-up of GDP growth in our country during the last 15 years has been truly remarkable; it has lifted about 250 million people from abject poverty.

The renaissance of our economy has been driven by the deregulation of the organized sector and the liberation of the people in 1,200 larger cities (population over 50,000).

“Little India”, a term I will use to refer to the over 600,000 small towns and villages with a population less than 50,000, has not experienced the highs implied in campaigns such as ?India Shining? or ?Incredible India@60?. The 800 million people of Little India are still in the clutches of a centralized and bureaucratic system.

I wish to emphasize three points:

Enterprise and decentralization are two sides of the same coin. Whether in a company or a country, enterprise and innovation are promoted by decentralizing authority and empowering people.

The natural enterprise of large-town India was released by the liberalization of the 1990s. However, Little India has benefited less.

Society in the small towns and villages has been self governing for a large part of history. The centralised form of governance adopted after independence has shackled the natural enterprise of the people in Little India.

Over 60 years, the nation has experimented with many approaches to spreading prosperity. We need better results. It is time to try a different intuitive and natural approach. We need to liberate Little India by empowering the people and promoting more local governance. That is the only way to spread prosperity to larger sections of our population because it will unleash the natural enterprise of people out there. We need an economic movement that starts in villages, not one that bypasses them.

Government-Less Civilization

The statesman, C. Rajagopalachari, wrote, ?India had probably the largest number and very big time-lengths of intervals between one effective government and another. There have been a great many periods during which the people had neither central nor regional governments exercising effective authority. All these periods of what may be called a no-government condition could not possibly have been tided over but for the self-restraints imposed by our culture.? This gene of enterprise prospered for centuries under a government-less system in which small communities managed their interests locally. In terms of governance, India has for the large part been a multiplicity of village communities. Excluding five of the 25 centuries of recorded history, a centralised bureaucratic state in India was a rarity.

Studies By Tata

Very recently, the Department of Economics and Statistics in Tata Services (DES) undertook a study on entrepreneurship in Little India. The findings are yet to be published, but I can quote a few salient features.

The aim was to understand the nature of entrepreneurship, and the barriers and triggers to enterprise in small places. Approximately, 1,200 small entrepreneurs were interviewed in and around 12 village clusters in the four regions of India.

The study suggests a model for sparking enterprise in small towns and villages. It has four drivers: Infrastructure (roads, electricity, water), Finance and Facilitation (loans, helpful officials), ?Rural MBA? (training on markets and basic commerce) and Social Capital (health, education, hope).

Two activities were found to dominate the enterprise – about 50 per cent are engaged in commercial farming and 20 per cent in Rural Non Farm Services (RNFS), a fast growing rural job generator that holds much promise.

The findings are interesting in five respects:

Panchayat leaders and local politicians, whom urban folks tend to trash, are seen as quite helpful in promoting enterprise.

Bank officials are also perceived as helpful. Admittedly this is a partial view because the banking system has rather limited reach. As per NSSO data, half the farming households do not access any credit, whether from institutional or non-institutional sources. Even among farmer borrowers, there is more recourse to non-institutional sources than the banking sector.

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Source: Sify News