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Budget, Rural Development and Chinese Model

Even though the contribution of agricultural sector to the GDP has come down to 25 per cent, almost 70 per cent of the population is dependent on it directly or indirectly. The fate of agriculture till today is determined largely by the monsoon. If the monsoon does not come on time and in sufficient quantity, not only the production of food grains, pulses, vegetables, fodder and a number of raw materials agro-industries declines, but the market for industrial goods also shrinks for a lack of purchasing power with rural population. There is a huge loss of livestock due to a shortage of fodder and water. Often a mass scale migration of labourers takes place from rural to urban areas looking for jobs.

In recent years agriculture has been callously neglected. As a result during two out of the six years of the NDA rule the rate of growth of agricultural production was negative. It went down by 0.1 per cent in 2000-01 and 5.2 per cent in 2002-03. It increased by just 0.3 per cent in 1999-2000 and by 6.2, 6.5 and 9.1 per cent in 1989-99, 2001-02 and 2003-04 respectively thanks to the rain god. The amount of capital formation in agriculture continuously went down during the NDA regime. The Economic Survey for 2003-04 points out that the main reason for this had been a fall in public investment. Consequently, rural infrastructure, irrigation and agricultural research and development were neglected. There was a complete collapse of rural employment generation. Government figures underline that the extent of total rural employment generation came to just one third of the rate of growth of rural population. It is needless to add that it was the rural discontent that brought down of the NDA rule notwithstanding all the efforts of spin-doctors to make ‘India shine’ and the people ‘feel good’.

The UPA (United Progressive Alliance) seems to have drawn proper lessons and is wiser. Its CMP (Common Minimum Programme) has stated that it “will immediately enact a National Employment Guarantee Act. This will provide a legal guarantee for at least 100 days of employment on asset-creating public works programmes every year at a minimum wage for every rural household.” Experts have computed that at the minimum daily wage of Rs 60 the total wage bill for 100 days per year will come to Rs 6000 and the annual non wage complement will be Rs 3000.Thus the total expenditure on employing one person per household for 100 days will amount to Rs 9000. And for the country as a whole this scheme needs an annual allocation of Rs 33,000 to Rs 44,000 crore.

The UPA is clear from the very beginning that the scheme will be aimed at asset creation. New roads, school and panchayat buildings, and wells will be constructed and existing ones repaired. Ponds, irrigation channels, etc. will be renovated. Besides, wage incomes in the hands of the rural population will create demands for both locally produced and imported goods and services. The migration of labourers will slow down if not completely stop.

The Finance Minister has underlined in his budget speech the strategy of accelerating “agricultural growth through diversification and development of agro-processing” and referred to Prime Minister’s address to the Nation on June 24, 2004. Dr. Manmohan Singh in his address promised a “New Deal” to rural India. According to P. Chidambaram, “This New Deal is not only essential for rural development and welfare, but also essential for achieving sustained overall annual growth of 7-8 per cent and generating employment.”

Five days later, the Prime Minister, inaugurating a conference of Chief Ministers on Panchayati Raj explained what he meant by his “New Deal” to rural India. He made it clear that it was nothing but the Chinese model of rural development. He intended creating business hubs throughout rural India on the lines of China to increase agricultural production and ameliorate the lives of rural population. In his own words: “We need to learn from the Chinese model of rural business hubs that add value to agricultural produce within the rural area.” He expressed “concerns that we have not been able to unlock varying resource potential of different regions, use funds optimally and make Panchayati Raj institutions effective can all perhaps be addressed by such a policy shift.”

In fact, the Chinese model is akin to the Gandhian scheme of decentralised development. Gandhiji had envisaged that there would be almost self-dependent development of rural areas based on local resources, manpower and demand. Most, if not all the needs, of the local population would be locally met. It would protect the finest elements of local culture and traditions and strengthen village fraternity. The present Chinese model of rural development dates back to 1978. It was then realised that the lives of the 80 per cent of the population that lived in villages could not be transformed for better without creating suitable local environment for unleashing their creative energy. There was an urgent need to provide them employment opportunities and improve their living conditions so that there was no urge in them to migrate to urban areas.

Land ownership was decollectivised and production in villages was made market-oriented. The ‘household responsibility system’ coming in the wake of decollectivisation obviously had in it some elements of property rights that generated market-oriented incentives for farming households that were allowed to keep all the incomes from their activities after meeting their tax obligations to the state. By the beginning of the 1990s it was found that farmers were inclined to go in for higher-value cash crops and devote more time to non-agricultural activities. Farmers nearer urban centres began producing fruits, vegetables, processed food items and other things, which could be easily marketed in neighbouring towns.

The Chinese rural inhabitants reduced their dependence on imported sources of energy by developing their own local sources of energy. It was found that they successfully exploited solar energy, developed large scale integrated utilisation of biogas, and brought in better kinds of stoves that led to saving of energy. They developed fuel wood plantation and energy saving technology. All these efforts checked deforestation and improved environment. Handicrafts mostly based on local resources and skills and for local market were encouraged.

Dr. Manmohan Singh is rightly concerned with our failure to unlock varying resource potential of different regions, use funds optimally and make Panchayati Raj institutions effective. Around Rs 17,000 crore is spent every year on the schemes concerning rural development and it is anybody’s guess as to how much of this produces worthwhile results. He wants the schemes to be revamped, and funds to devolve directly to panchayats. He believes: “The key instrument for integrating economic reforms with institutional reforms in the countryside is Gandhiji’s farsighted goal of Purna Swaraj through Gram Swaraj… our challenge today is to institutionalise the system of local self government.” .

These ideas are really laudable, however the main thing is their implementation. China has an effective instrument for popular mobilisation and overseeing in the form of the Communist Party but here one is not sure how far the constituents of the UPA can play that role.