How Distance to Town Makes a Difference

Three sources of data consulted for these analyses merit brief description before the results from data analysis are introduced. Two waves of sample surveys representative of rural areas of 16 major states, undertaken by the National Council for Applied Economic Research (NCAER), a well known applied economics research institution in India, constitute the first data source.7 These multidimensional surveys, conducted, respectively, in 1993-94 and 2004-05, encompass a wide range of human development and poverty-related issues. A stratified random sampling design resulted in the selection in 1993-94 of 33,230 households from 16 large states. About one half of these households, 13,459 in all, were selected at random for resurvey in 2004-05. We examined these data sets in order to investigate the nature of changes occurring within different villages and households.

The second set of data – the District-Level Household and Facility Survey of 2007-08 (DLHS-3) – is broader in coverage, providing information related to 7,20,320 households from 28 states and six union territories of India during 2007-08.8 A total of 78% of the surveyed households (5,59,663 households in all) lived in rural areas, and we focused on this part of the DLHS-3 sample.

The third set of data is from the Census of India, conducted, respectively, in 1991 and 2001. Census data for the household level are not publicly available, so we used these data for our villagelevel analysis, examining them in particular to assess differences in infrastructure provision among different bands of villages, located at increasing radial distances from the nearest town.

Table 1 provides the calculations related to changes in per capita income that resulted from stratifying villages in the two NCAER data sets by distance (in kilometres) from the nearest town. Three concentric circles were constructed for this purpose.9 The nearest circle of villages, located within five

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kilometres from the nearest town, made up 13.1% of the rural Indian population, according to the Census of 2001. The next circle or band of villages, located between five and 10 kilometres from the nearest town, accounted for 19.5% of the rural population. The third and last band of villages, beyond 10 kilometres from the nearest town, is the most heavily populated, accounting in 2001 for 67.5% of the entire rural population. These are the villages that have fared the worst during the period of postliberalisation economic growth, as we will see later in this paper.

Monthly per capita incomes for households in each of these concentric circles (or bands) of villages were averaged separately for 1993-94 and 2004-05.10 The figures for 1993-94 were adjusted for inflation in order to derive figures comparable to those recorded in 2004-05.11 Table 1: Radial Distance, Income Growth and Poverty Reduction

Village Share in Rural Monthly Monthly Per Monthly Change in Population Poverty Distance to Population Per Capita Capita Income Per Capita Per Capita Below Reduction Nearest Town (Census 2001) Income (1993-94 at 2004-05 Income Income Poverty (1993-2005)

(1993-94) Prices) (2004-05) (1993-2005) Line (1993)

% Rs Rs Rs% %%

Source: NCAER data (1994, 2005).

The figures reported in Table 1 show how the effects of marketled growth have been experienced most directly and beneficially in a fringe group of rural areas located adjacent to towns. Average per capita incomes have grown rapidly in villages located within this umbra – or inner belt of villages – that circles towns within a radial distance of five kilometres. Outside the five kilometre limit, within the “penumbra” of villages – located more than five kilometres from the nearest town – real per capita incomes have fallen.12

The benefits of national economic growth have, therefore, penetrated only a thin layer of the Indian countryside, petering out and turning negative in villages beyond five kilometres from towns. Results from regression analysis showed that, even after controlling for the effects of diverse factors, distance to town continued to make a significant and large difference.13

Poverty has been reduced within umbra villages, but it has simultaneously increased within penumbra villages, as the last two columns of Table 1 indicate.14 In villages located between five and 10 kilometres from the nearest town, the percentage in poverty went up by 5.6% over this 12-year period, while still further away, more than 10 kilometres from towns, the increase in poverty was higher, 6.2%. The sorriest part is that the vast majority of rural Indians live within such penumbra villages, more than five kilometres from the nearest town.15

Distance to town is thus critically important for understanding current-day economic trends in rural India. Being less well linked to towns is no longer a matter merely of standing still, of being a bystander left behind by the train of economic progress. Those who were left behind have tended to fall further behind.

Per capita incomes have fallen in penumbra villages, with the lowest income groups experiencing the largest dips. Table 2 (p 46) provides these figures after disaggregating each band (or belt) of villages into income quintiles, arranged from the lowest to the

Spatial Hierarchy of Economic Growth

The data and analyses presented above show how spatiallypatterned inequality has increased in rural India, but why such a trend should have come into being still needs to be explained, and if possible, countered. In this section and the next one, we will draw upon theory and evidence to sketch the rudiments of a likely explanation. First, we will look at the reasons why towns have acquired disproportionate economic importance. Following that, we will examine why and how distance to towns makes a difference in rural areas.

Sassen (2001: 3) has provided, in the global context, an explanation for the growing economic importance of towns, particularly the largest cities:

A combination of spatial dispersion and global integration has created a new strategic role for major cities… [which] now function in four new ways: first, as highly concentrated command points in the organization of the economy; second, as key locations for finance and for specialised service firms, which have replaced manufacturing as the leading economic sectors; third, as sites of production…; and fourth, as markets for the products and innovations produced. These changes in the functioning of cities have had a massive impact… Cities concentrate control over vast resources… Key structures of the world economy are necessarily situated in cities.

As economies become driven by services, particularly hightechnology and financial services, bigger cities acquire increased dominance as economic hubs. An integrated mass of infrastructure – banks and broadband connections, shopping malls and first-rate schools, secretarial services and airports, restaurants and entertainment arts – must all coexist in order for a city to attract a critical mass of upwardly mobile specialists and professionals. Smaller towns and peripheral villages can do no better than to link up with these hubs.17

The post-liberalisation Indian experience mimics these trends, showing how growth that is services-driven and globally-linked spreads downward in lineal linkage from bigger towns to smaller settlements. This lineal spread has benefited towns people in India, albeit to different extents, depending on their city’s size. Examining the period between 1987-88 and 1993-94, Dubey, Gangopadhyay and Wadhwa (2001: 57) found that “poverty incidence did decline with town or city size. This was true for all occupational groups.” Going further, they pointed out that “while larger cities have higher educational levels, education alone does not explain the differing poverty… Larger cities tend to have better social and economic infrastructures”.

The effects of these differences in social and economic infrastructures have been revealed by analyses which show that, no matter what one’s level of education, earnings are higher if one lives within a large town as compared to a small town (and in a small town as compared to a rural village). For instance,

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individuals who have only a primary education can earn up to 68% more by living in a metro city (one that has more than five million people) as compared to a smaller town (with fewer than 5,00,000 people). Among people with college degrees, the corresponding income differential is smaller, though still substantial: 38% (Shukla 2010). Poverty continues to be lowest in the largest cities and highest in small towns and rural areas (Kundu and Sarangi 2007). In fact, as we saw above, poverty has grown in villages located further away from towns.

Village residents who live closer to towns can more easily benefit from these lineal-radial patterns of economic development: their lands grow in value and their labour is in greater demand. Those who live further out have comparatively little to offer that is of equal value. Their lands are not attractive to builders or industrialists. Their labour supply, particularly that of the less educated ones, simply adds to the growing pool of unskilled or partly skilled labour, demand for which has risen much less slowly as compared to demand for skilled workers (Kijima 2006).

The cumulative effect of these differences in earning potentials becomes visible when we look at asset ownership. The biggest towns have the largest concentrations of assets. Table 3 provides some points of comparison, illustrating the steep gradient that continues to persist. Each of the four types of assets examined here is owned by a greater proportion of households in large cities as compared to small towns (and small towns as compared to rural villages), reflecting the congealed effect of differences in earning opportunities. Table 3: Share of Households Possessing Assets of Different Kinds (2004-05)

Source: Shukla (2010).

Substantial differences in asset holdings are also visible within rural areas. Not surprisingly, given what we have seen above, distances to town helps sort out these differences (Table 4). Every asset type examined here is possessed by a larger share of household in umbra as compared to penumbra villages.

The thesis of radial dissipation receives further support when we look at assets in addition to incomes. The possession of each type of asset dissipates regularly as we move outward from towns into the remote countryside.

Declining Agriculture, Diminishing Infrastructure and Differential Access

Explaining why rural assets and incomes are both patterned radially, why distance to town matters so much, is assisted by drawing on three contemporary facts, which, considered together, help understand better the nature of handicaps suffered by penumbra villagers:

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from penumbra villages to forge the required economic linkages with towns; and

• Third, the rising premium to higher education and superior skills, the preferential location of high schools and colleges in towns and villages closer to towns, and the greater ability of richer villagers to acquire higher education (no matter at what distance), helps explain further the growing gap between richer and poorer villagers and among villages located closer to and further from towns.

Let us examine each of these factors in turn. The share of agriculture in rural incomes has fallen by more than 25% (from nearly 60% in 1993-94 to less than 35% in 2004-05).

The diminishing importance of agriculture is not just due to the growth of other sectors; agriculture itself is also in crisis, after a decade of the lowest growth rates since Independence. During 1994-95 – 2004-05, its annual growth rate was only 0.6% (as against, in most years since Independence, between 2% and 4%). This crisis in Indian agriculture is well acknowledged by Indian authorities (Lerche 2010: 67).18

With each passing generation, holdings have been subdivided, resulting in a preponderance of tiny and uneconomic family farms. Between 1993 and 2005, the proportion of landless households increased from 13% to 15%; more than 60% of all farming households operate marginal holdings, less than one hectare in size (NCEUS 2007: 112-13). Simultaneously, agricultural productivity has not increased significantly for many years.19 As a result, the amounts received per capita from agriculture have fallen in both relative and absolute value.

Surprising as it may seem to some, agriculture provides less than half of all incomes in contemporary rural India. The rest has to be earned elsewhere, principally in towns. Survival needs “require developing a connection with the city”.20 As Gupta (2005: 751) remarks, “the sheer inertia of the agrarian economy…is forcing people to look elsewhere for both livelihood and respect”. One or more members from nearly 30% of all rural households have migrated to towns (NSSO 2010), and several more are “circular” migrants, going into towns for a few days or weeks at a time

Table 4: Percentage of Rural Households with Assets of Different Kinds (2008)

Source: DLHS-3 data.

and returning to their villages in between (Deshingkar and Farrington 2009). Connecting with cities has, therefore, become crucial for village residents. Such connections are assisted by the availability of linking infrastructure.

Rural infrastructure has been vastly expanded over the 10-year period between 1991 and 2001. The percentage of villages connected by paved roads went up from 42% to 64%, and the proportion served with electric power went up from 68% to 76%. However, public infrastructure remains disproportionately located in

Conclusion: What Should Be Done?

Dots, representing cities, shine brightly in satellite pictures of the world at night. The map of India is studded with such dots, some small and others large. These points of light are surrounded by swathes of darkness, representing the rural areas. Such a map and such representations are apt metaphors for the nature of economic changes experienced in cities and villages over the 12-year period, 1993-2005. Cities, prospering, have lit up, and these lights have been partly reflected in villages located closest to cities; further into the rural areas, darkness has grown.

The evidence advanced here shows how, during the 12-year period, 1993-2005, when the national economy was rapidly growing, inflation-adjusted incomes fell, on average, and poverty grew, in villages located more than five kilometres from the nearest town. More than two-thirds of all people in rural Indian live in such further away villages, indicating how the spatial dimension of poverty in an era of market-led growth are critically influenced by distance to town. Growing inequality, a direct result of these trends, is a particularly worrying phenomenon, since it bodes ill for political stability as well as for future growth prospects.27

These sobering conclusions may change somewhat if data from other sources or other time periods are examined.28 Clearly, neither markets nor towns are frozen in time. Markets have expanded their reach, and new towns have come up where there

were previously villages. Table 8: Indications of Changing Radial Distance To some extent, our dif

(rough estimates)

Distance to Percentage of Rural Population

ferent data sources

Nearest Town Census NCAER DLHS-3 Changehelped to keep track of (2001) (2005) (2008) (2001-08)

these advances. Al-<5 km 13 22 31 18

5-10 km 20 28 27 7

though issues of compa

>10 km 67 50 42 -25

rability and coverage

Total 100 100 100 0

loom large, some broad indications of urban expansion are provided by looking simultaneously at Census data from 2001, NCAER data from 2005, and DLHS-3 data from 2008 (Table 8).

These rough comparisons indicate that the proportion of rural population in umbra villages (within five kilometres of towns) could have incre ased from 13% in 2001 to 31% in 2008, a gain of 18 percentage points. Simultaneously, the proportion living in the furthest-out villages (more than 10 kilometres from the nearest town) may have fallen even more drastically, by as much as 25 percentage points.29 Can it be hoped, therefore, that the autonomous growth of markets, and with it, the spread of towns, will bring progressively more villagers within the beneficial inner circle? Unfortunately, the data do not support any such optimistic prognosis.

While towns have, in fact, advanced, the bad news is that towns have gone where market forces have taken them, following the money, while largely avoiding marginal areas with greater concentrations of poorer people. In 2008, for example, villages beyond five kilometres of towns accounted for 69% of the entire rural population, but even greater proportions of poorer people

– more than 75% of scheduled castes, 83% of scheduled tribes and 73% of below-poverty-line households – lived within such villages. It seems too much to hope that the expansion of towns in the future will automatically correct these trends.

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There are different ways in which to interpret and account for becomes incumbent upon them to reduce the distance that exists these results. One way – a pessimistic one – is to conclude that between citizens and markets. globalisation-driven economic growth in a largely rural country, The question of exclusion of many has to be addressed. Unless with large numbers of poor and less educated people, will, by its investments in high-quality physical and social infrastructure nature, only be skin-deep. But that is to deny what else might are simultaneously made that connect outlying areas with the be possible. mainstream of growth, inequality will continue growing, and

A more realistic option lies not in becoming, like Myanmar, inclusive growth will remain a distant dream. isolated from world economic influences, but rather in assisting India’s first Prime Minister, Jawaharlal Nehru, writing in 1961, the remotest and poorest by helping them better realise for them-stated “I have no doubt that there is a vast reservoir of talent in selves the potential of market-based opportunities. In an era of this country. If only we can give it opportunity!”30 Policy tools are globalisation, markets are backed by public policy. Governments urgently required that can help convert this vision into reality in everywhere have attended to the needs of the market, preferen-India (and other similarly situated developing countries). Countially supplying quality infrastructure in big cities. It is important tries that have successfully attained inclusive growth have paid that cities possess the infrastructure required to attract organisa-attention to the need simultaneously of catering to the market tions and individuals who help create new wealth. and building strong and reliable links with outlying rural areas.31

But it is also necessary that the opportunities provided by glo-Currently, too little is being done in this regard in India, and as a balisation be brought home to a larger number of people; public result, “in terms of inequality of opportunity and intergenerapolicies cannot also simply follow the money. When governments tional mobility”, India may well be on the way to becoming “one pledge their citizens to a path of market-led economic growth, it of the worst [countries] in the world” (Bardhan 2010: 132).

29 Despite these reductions, 69% of the rural population continued to live within penumbra villages in 2008.

30 Jawaharlal Nehru, Letter to Chief Ministers, 27 June 1961, cited in Shourie (2006: x).

31 Whang (1981) explains how such opportunity equalising policies have worked in South Korea; Findlay and Wellisz (1993) do the same for the case of Hong Kong; while for the Chinese case, see Xiaojian (2007). Krishna (2010) reviews these and other examples.

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