CENTRE for POLICY ANALYSIS

CENTRE for POLICY ANALYSIS

“Social progress can be measured by the social position of the female sex” - Karl Marx

ARTICLE


Returning Migrants: A Boon For Rural Industrialisation?


Following the COVID-19-induced economic disruptions, up to 135 million jobs could be lost and 120 million people might be pushed back into poverty in India, all of which will have a hit on consumer income, spending and savings, says a recent CMIE report. "India's job market looks grim with just 5 per cent of companies planning to add more staff in the next three months as corporate gear up for the post-lockdown era with a wait-and-watch policy", a recent industry survey said.

According to the National Sample Survey Employment-Unemployment Rounds in 2011-12, the construction sector which was the largest employer of rural men and women next to the manufacturing sector (78.1% of employment shared by informal sector excluding farm-based activities) has been affected by lockdown, and migrant rural labour force have been forced to return to their villages in search of livelihoods.

There must be a short-term, medium-term and long-term impact on the urban economy as the lockdown is lifted. First, there will be impact on the supply-side of labour economy, as upset over the treatment meted out to them, large number of migrant labourers have vowed not to go back. "Ab Shehar kabhi nahi jayenge. Yahin kheti-baadi karenge, noon-namak khaenge (We will not go to the city again, will pursue farming here, live on salt)." "In the cities they treat us like stray dogs," several have said. "Why would they treat us any better in future?"

In addition, the informalised sector cannot anticipate when the lockdown will be completely lifted in view of the increasing rate of Covid-19 transmissions and infections.

On the consumption front, once lockdown is lifted, non-food expenditure or the conspicuous hedonic consumption of luxury goods will adversely be affected, as the income shock from the informal sector spills over to the formal economy and contracts it further.

In the construction sector, stalled projects, especially at the construction site are seriously impacted and post-lockdown, these projects will take a few weeks and months to resume and gain momentum.

In addition, though supply chains and logistics companies will resume their businesses post-lockdown, they will face a serious cash crunch. Such a situation will affect their operating cycle and without the working capital reserve it will be difficult to expand their economies of scale and scope.

In any economy, job creation depends upon certain critical factors such as the economy's projected and actual output, gross employment ratio, skilled workforce, incremental capital-output ratio, among other macroeconomic indicators. The economic scenario of last few quarters suggests that additional job creation cannot take place without the right incentives from governments i.e. the public sector. However, that incentive should not crowd out the private sector's investment in the employment structure.

Therefore, all the macro-economic indicators stated above will catalyse the large-scale decentralisation of Indian economies. In the forthcoming weeks and months, cooperative federalism and Panchayati Raj Institutions can be expected to be strengthened to a large extent, leading to a process of decentralisation for the rural economy in India.

Signs and symptoms of the anticipated large-scale decentralisation were noticed during the last few years. The pandemic has only added fuel to the fire. The negative pressure on rural wage and food price inflation is considered to be the most important factor attributable to this decentralisation that we have noticed starting from 2016-17, especially in the post-demonetisation period.

Secondly, agricultural real wage and construction (mason) real wage growth rate (about 14%) had moved upward considerably between 2007 and 2013. Both real wage rates had become negative from November 2014 and ultimately reached 3% in 2017-18. Moreover, in 2014-15, foodgrain production was also affected due to drought and low farm-gate prices that impacted the WPI and agricultural and rural wage rates which lead to the overall growth and development of the vast rural labour force.

Now, Covid-19 has further deteriorated this structural problem. As a result, today a decentralised rural economy has to ensure livelihoods of millions of rural migrants, including farming communities, by creating a favourable environment for gainful farming and non-farming income generating activities.

Such activities could be through MGNREGS that has been criticised after 2013 due to wage rate discrimination, exploitation at the workplace, unreasonable delay in payment and leakage. In the past few weeks, this MGNREGS has seen stupendous demand as crores of migrant workers have returned to their native villages. The Budget allocation under the scheme has been raised to Rs 1,01,500 crore. The provision of 281 crore person-days is agreed for the current financial year, which may be revised upwards after due consultation with the states.

Today the rural farm sector accounts for 14.38% of gross value added at current prices and the non-farm sector including manufacturing has relatively a higher contribution to GVA. Further improvement of GVA can only be possible by rapidly improving the technology-enabled farm value chains and promotion of agri-enterprises and/or integration with non-farm enterprises.

For the farming sector, rural India needs to prioritise secondary agriculture through integrated farming activities and a focus on sustainability of production, monetisation of farmers' produce, strengthening of farm extension services, and recognizing agriculture as enterprises.

This is a very good opportunity for Farmer Producer Organisations to make a significant contribution in rural economy. FPOs should harness the potential of farm economy extensively now. For the non-farming sector, MSMEs should come in a big way to absorb the migrant labourer apart from MNREGS wage fare program.

In addition, several migrant returnees from urban industrial cities will decide to become self-entrepreneurs and join other like-minded people in the forthcoming weeks and months.

The basic idea behind such initiatives is "neighbourhood employment", because people are increasingly looking for safe, secured and peaceful living standards.

Panchayati Raj Institutions in coordination with state governments should facilitate the industrialization and development of rural regions in India. Cluster-based farming can be adopted for growing high-value crops with focus on biodiversity, food security and nutrition. In order to avoid the wastage or post-harvest losses of crops, the Private Entrepreneurs Guarantee (PEG) Scheme funded by NABARD could be encouraged.

Many of India's promising grassroots MSME innovators, who beat all odds and stunned others through their low-cost rural innovations, will benefit from any actual support from institutions such as the National Innovation Foundation, an autonomous body of the Department of Science and Technology, Government of India, which is providing institutional support for scouting, spawning, sustaining and scaling up grassroot innovations developed by individuals and local communities in any technological field, helping in human survival without any help from formal sector.

Several other low-cost rural technology development and innovation programmes are currently sponsored by this government department, all designed with the right focus to back the recently redefined MSME sector.

Foundation of a sound innovation system rests on appropriate coordination between the public sector, private sector and community. However, the project-industry interface in India has been rather ineffective despite efforts in that direction over the last couple of decades. In order to make any innovation programme effective, policymakers need to work on a multi-pronged approach that aims at creating inclusive innovation funds, industry innovation clusters, university innovation clusters, nurture innovation through education and create state and sector-specific innovation councils.

The issue of inclusiveness is paramount, reflected in priorities such as connecting people and technology for innovation through rural broadband and implementing ICT interventions in policing and jurisprudence.

In order to encourage better price realisation, market linkages need to be established. FPO communities should also be encouraged to participate in MSP-based procurement operations. In addition, eNAM can connect millions of farmers with distant buyers leading to buyer-seller meet and exploiting the potential of food supply chains.

The promotion of MSMEs/small-scale industries by linking the farm sector should take place on a priority basis. Stated differently, the primary and secondary sectors can contribute to the fast-paced industrialisation and development of rural India.

However, the biggest limitation of eNAM and other similar programmes seems to be that the vast majority of farmers and rural Indians are not English-speaking and not tech-savvy, besides the low smartphone and low internet penetration enabled in in the rural heartland so far.

Secondary agriculture too should be promoted by public/private sector. According to Ashok Dalwai Report (2018), any activity on the farm that is done beyond the kharif, rabi and zaid seasons is secondary agriculture. Income- generation activities that use crop residues - paddy straw, fodder blocks and crop residue briquettes, would qualify in this category. All output from farming has inherent value and nothing should be considered as waste if it is put to gainful use. Cleaning, sorting and grading of agri-produce to make it saleable, bee keeping, mushroom cultivation, backyard poultry, dairying and sheep rearing - such activities should be promoted.

Cooperative approach, cluster farming, financial literacy and sales/marketing skills are important to build enterprises led by FPOs or community organisations. Enterprises that are based on the utilisation of alternative enterprises to primary agriculture, but associated with rural off-farm activities such as poultry, bee-keeping, duck farming, piggery, and livestock management are off-farm enterprises that can be promoted as part of the integrated farming system.

A third category of enterprises depends on crop residues or other by-products of primary agriculture. Sugar and cotton ginning mills can produce by-products for use in secondary agriculture.

Skill development for the farming sector is another most important area for knowing the market structure, conduct and performance. Financing should then come to the fore. Apart from Kisan Credit Cards or crop loans, NABARD as well as SIDBI-funded storage and micro-entrepreneurs schemes and MUDRA schemes should reach to the last mile for enterprise development.

In conclusion, in order to promote rural industrialisation, there must be recognition of priority sector status for institutional credit; low-cost skilling; knowledge-based exposure of farming communities; specialised extension services for businesses owned by women and marginalised communities; priority under rural electrification and micro-irrigation objectives; fast-tracked procedures to avail benefits of central sector schemes; and geographical indication labels for products of village-scale secondary agriculture.

Joydip Dey (MBA, LLB) has more than 23 years' complex industry experience in strategising and implementing human resources as well as rural development/ livelihood generation plans and programmes

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