THE ECONOMIC WEEKLY

A u g u s t 2 7 , 1960

Rural Industrialisation
Its Pattern and Problems
MCS
RURAL i n d u s t r i a l i s a t i o n i s general- (5) S t i m u l a t i o n of local savings p a r t l y because recent technological
ly regarded as an essential and and capital f o r m a t i o n and i n - developments have f r e e d them f r o m
inseparable o b j e c t i v e of developmen- culcation of a s p i r i t of indus- the t r a d i t i o n a l l o c a t i o n a l "pulls" and
tal endeavours in the c o u n t r y . This t r i a l i n i t i a t i v e i n r u r a l areas. p a r t l y also because the m a r g i n a l cost
unanimity o f o p i n i o n does not,
Objective ( 1 ) lakes f o r g r a n t e d i n v o l v e d in the creation of some of
however, extend either to the speci-
the i m p o r t a n c e of a balanced pat- the i m p o r t a n t "missing' overhead
fic issues sought to be solved or to
tern o f i n d u s t r i a l g r o w t h . I t em- facilities is l i k e l y to be matched by
the suggested methods of accompli-
phasises iht* need of providing marginal returns, both f r o m the
s h i n g the process. Besides, there is
requisite facilities as almost a pre- angle of society a n d of the p r i v a t e
no agreement on the a p p r o p r i a t e
c o n d i t i o n f o r the successful accom- entrepreneur. ' R u r a l i s a t i o n of large-
p a t t e r n of the p r o g r a m m e nor ade-
plishment of the process. It also scale units, which it ultimately
quate a p p r e c i a t i o n of the various amounts to, may be a desirable ob-
focuses attention on the i n c r e a s i n g
problems likely to arise in its jective in other spheres, b u t may
social cost of a g g l o m e r a t i o n . As
i m p l e m e n t a t i o n . T h i s note attempts, not be h e l p f u l in p r o m o t i n g the
a e o r o l l o r y to t h i s may also be a d d -
in the l i g h t of the f o l l o w i n g discus- over-all objectives of r u r a l indus-
ed the l i k e l y social cost involved in
sion on objectives a n d p r o b l e m s , to trialisation. S p e c i f i c a l l y , they m a y
the creation of the necessary pre-
suggest the outlines of a pattern of requisites f o r i n d u s t r i a l g r o w t h at neither help relieve r u r a l u n e m p l o y -
rural industrialisation. dispersed centres. ment ( o f any d e s c r i p t i o n ) d i r e c t l y
T h e objectives o f r u r a l i n d u s t r i a - a n d t a n g i b l y nor c o n t r i b u t e to the
W h e n related to a specific area,
l i s a t i o n are m a n y and v a r i o u s l y r u r a l ' n a t i o n a l ' income. Illustrative
the concept of ' r e g i o n a l l y balanced
defined ; p r o m o t i o n of decentralisa- instances are not l a c k i n g . B a n g a l o r e
i n d u s t r i a l g r o w t h ' can be i d e n t i f i e d
tion and balanced i n d u s t r i a l g r o w t h , d i s t r i c t , f o r instance, is the venue of
w i t h the p o l i c y of dispersal. There
removal of economic i n e q u a l i t y ; several large-scale u n d e r t a k i n g s in
is a genera! misconception about the
d e v o l u t i o n of social and p o l i t i c a l the p u b l i c sector. B u t no v i s i b l e
process of dispersal and the p r o m o -
power; eradication of rural un- i m p a c t o f t h e i r location i n the area
tion of small-scale industries at
employment and under-employment; is noticeable, either in terms of the
these dispersed centres. In other
establishment of an a g r o - i n d u s t r i a l employment opportunities afforded
words, small-scale industries are
base f o r the i n t e g r a t e d development to the local people or in the p r o m o -
sought to be located in dispersed
of r u r a l a n d u r b | n areas, etc. No tion of a n c i l l a r y units.
centres and thus expected to create
one can q u a r r e l w i t h these objec- new employment opportunities in
T h i s somewhat anomalous situa-
tives. They are, however, rather the dispersed r u r a l tracts, e x p l o i t i n g
g e n e r a l , if ' n o t vague. As a f r a m e - tion may be r e c t i f i e d if the process
as it were, local raw m a t e r i a l s and
w o r k f o r discussion, these objectives of dispersal is preceded by an ener-
catering f o r a l o c a l m a r k e t , thus
may be presented explicitly as getic p r o g r a m m e f o r e n s u r i n g the
ultimately r e d u c i n g the e x i s t i n g eco-
follows : requisite external economies and
n o m i c d i s p a r i t i e s a n d also the one-
market advantages at these centres.
(1) Involution of a balanced way How of p o p u l a t i o n to urban
The role of I n d u s t r i a l Estates spon-
p a t t e r n of location of indus- i n d u s t r i a l pockets.
sored by the G o v e r n m e n t of I n d i a
try by p r o v i d i n g facilities FACTOR ENDOWMENT in this respect needs to be studied
f o r i n d u s t r i a l g r o w t h at dis- Successful dispersal of i n d u s t r i a l and analysed, t h o u g h the way these
persed centres, thus sealing location depends on the factor- Estates have tended to be located in
d o w n tlie increasing social endowmeiu situation embracing mu- or nearabout e x i s t i n g cities suggests
costs of excessive urbanisa- t u a l l y s u p p o r t i n g "matrices' of acti- that even this p r o g r a m m e has not
tion. v i t y such as the p r o m p t a v a i l a b i l i t y successfully got over the influence
(2) C r e a t i o n o f new e m p l o y m e n t of the t r a d i t i o n a l locational ' p u l l s ' .
of a variety of l a b o u r skills, p r o x i -
o p p o r t u n i t i e s in areas of ex- m i t y of s u b c o n t r a c t i n g services and COST OF DISPERSAL
tensive or permanent un- suppliers, and f a c i l i t i e s of t r a n s p o r t ,
employment. m a r k e t i n g centres a n d sources of T h o u g h f r e q u e n t m e n t i o n is made
raw materials. T h e l o g i c of indus- of the social cost of u r b a n conges-
(3) Fuller utilisation o f under-
t r i a l units h e r d i n g themselves i n t i o n , rarely is this cost sought to be
utilised resources, i n c l u d i n g
existing centres of i n d u s t r i a l agglo- weighed against the l i k e l y social
industrial raw materials,
cost i n v o l v e d in the c r e a t i o n of these
manpower and electricity. m e r a t i o n is thus largely e x p l a i n e d .
very 'agglomeration' facilities at
Dispersal against this b a c k g r o u n d
(4) I n i t i a t i o n of a process of dispersed centres. These relate not
o n l y means transfer of u n i t s to an
'skill-formation' a m o n g the merely to d i r e c t investment of such
uncongenial atmosphere unless it is
r u r a l people g e n e r a l l y , and items as f a c t o r y accommodation,
preceded by a massive p r o g r a m m e
among rural artisans in roads a n d c o m m u n i c a t i o n facilities-
of d u p l i c a t i n g these e x t e r n a l econo-
p a r t i c u l a r , so t h a t m o r e p r o - common production and industry-
mies at the new locations.
ductive, modern techniques f a c i l i t y centres, power s u p p l y a n d so
are popularised in rural In this context large-scale units on. T h e y also refer to i n d i r e c t yet
areas, are m o r e amenable to dispersal, t a n g i b l e items of e x p e n d i t u r e such

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A u g u s t 27, 1960 THE ECONOMIC WEEKLY

1318
THE ECONOMIC WEEKLY
as outlays on town-planning, p r o v i -
sion of d r i n k i n g water, sanitary faci-
lities and other social overheads
l i k e schools, hospitals, recreational
facilities, residential quarters and a
host of other items w h i c h together
ensure an amenable g r o u n d for the
sustenance of an i n d u s t r i a l town-
ship.
External economies in the 'agglo-
merated' centres are credited not
o n l y w i t h the fostering of a r a p i d
rate of i n d u s t r i a l g r o w t h hut also,
of raising, in the process, the aggre-
gate social p r o d u c t i v i t y of the com-
m u n i t y . T h i s is corroborated by
the history of the industrial evolu-
tion of all industrialised countries in
the w o r l d . Increased social produc-
t i v i t y does contribute a distinctive
f o r m of 'return 1 . If tools c o u l d be
perfected to measure the various
phases of such ' r e t u r n in relation to
'agglomeration" costs, it could be
seen that even h e i r the law of
d i m i n i s h i n g returns o p e r a t e s . T h i s
would undoubtedly be a valuable
source of guidance to the p l a n n i n g
authorities.
Present knowledge of the econo-
mics of agglomeration, however,
does not provide Us w i t h any clue
to various phases vis-a-vis the social
cost and return. Perhaps, we shall
have to contend w i t h posing the
problem in an altered f o r m of 'allo-
cation-choice' and seek answers to
such questions as the relative pro-
d u c t i v i t y of a given volume of out-
lay in existing cities and dispersed
centres in terms of the rate, of
industrial g r o w t h and increase in
employment opportunities.
AREA RESOURCES
Another i m p o r t a n t objective of a
p r o g r a m m e of r u r a l industrialisa-
tion is the creation of employment
opportunities in chronic pockets of
unemployment. The assumption is
that the existing r u r a l economy is
generally of the 'subsistence' type,
characterised by disguised and open
unemployment. Development of i n -
dustries in such areas, it is believed,
w o u l d not only provide gainful i n -
dustrial employment to the un-
employed and 'redundant' labour,
but. also tend to increase the pro-
d u c t i v i t y of the a g r i c u l t u r a l econo-
m \ \ It would also obviously reverse
the tide of rural exodus.
One may point out that it is f u t i l e
to expect that the areas characterised
by severe unemployment w i l l also be
suitable centres for i n d u s t r i a l loca-
t i o n . Besides, as is evident f r o m
our earlier discussion, even if it
should be possible to locate certain
types and scales of industrial orga-
nisation, at such centres, the charac-
teristics of the area must be such
as to absorb the benefits of their
location in terms of employment
among others. T h i s presupposes,
therefore, an assessment of the t y p e
of labour available for employment
in terms of technical s k i l l and
t r a i n i n g , backed by a positive pro-
gramme to t r a i n them up to be
employable. T h i s apart, there is
also need f o r an assessment of the
type, q u a n t u m and q u a l i t y of v a r i -
ous raw materials and other resour-
ces locally available so that a
matching of area resources could
a p p r o p r i a t e l y be undertaken in con-
sonance w i t h the industry-potential
of the area.
FULLER UTILISATION
Such an assessment of area
characteristics in reference to re-
source configuration w i l l also be
helpful in h i g h l i g h t i n g their present
level of exploitation. This would
facilitate an estimation of the under-
utilised resources of all sorts.
Objective ( 3 ) seeks the effective ex-
p l o i t a t i o n of u n d e r u t i l i s e d resour-
ces such as i n d u s t r i a l raw materials
based on agriculture and forestry,
mineral and other resources of
geological o r i g i n and the like w h i c h
may not be effectiveiy used at the
moment. T h i s refers also to the
fuller utilisation of basic overheads
already created in the area such as
electric power, w h i c h may be pre-
sently under-utilised or seasonally
utilised, either in a g r i c u l t u r a l opera-
tions or in seasonal industries l i k e
the g i n n i n g and processing of cotton.
pressing of oilseeds or other agri-
culture-based industries. W i t h
evolution of measures for the f u l l e r
u t i l i s a t i o n of these under-utilised
resources, avenues will also
created for the f u l l e r utilisation of
the seasonally unemployed
under-employed r u r a l labour.
It is, however, evident that indus-
tries sought to be developed as
counter-cyclical to agriculture should
in themselves have alternate peak
and slack phases. Or such indus-
tries w i l l have to be of a relatively
labour-intensive type, so that the
m a r g i n a l p r o d u c t i v i t y of the capital
invested in them does not prove I'n-
remuneraiive in terms of returns on
investment. An element of subsidy
may reasonably be expected to be in-
volved here, but purely f r o m the lar-
ger strategy of developmental plan-
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A u g u s t 27, 1960
n i n g the possibilities of achieving
the desired results in alternative
forms w i t h i n the given volume of
outlay, needs to be explored. In
any case, this is an issue w h i c h should
be subjected to searching analysis,
balancing the p r o b a b l e social and
economic returns in terms of the
effective utilisation of resources on
the one h a n d and the probable m a r g i -
nal economic and social returns in
alternative outlets on the other, for
a given volume of investment.
SKILL FORMATION
A programme for 'skill-formation'
among the r u r a l populace in general
and among r u r a l artisans in particu-
lar is regarded as an essential pre-
requisite for a successful p r o g r a m m e
of r u r a l i n d u s t r i a l i s a t i o n . It is con-
sidered indispensable,, first, f o r over-
coming the inherited social r i g i d i -
ties and i m m o b i l i t i e s a m o n g the r u r a l
masses, thus creating the necessary
conditions for an integrated develop-
ment of the people and the area.
Secondly, and that too more speci-
ficallv w i t h rural artisans, it will
prove to be an important agent in
rendering them more productive at
the given technological levels and
thus finally enabling them to reorient
themselves into viable small-scale
units at higher levels of technology.
The history of i n d u s t r i a l l y developed
countries of the w o r l d shows that pro-
gressive artisans were an important
factor in fostering technological ad-
vance and increased p r o d u c t i v i t y in
the evolutionary phases of these so-
cieties. Their potential was f u l l y inte-
grated and exploited by a p p r o p r i a t e
measures designed to stimulate their
inventive capacity. dexterity of
w o r k m a n s h i p and a b i l i t y f o r i m p r o v -
the
ed industrial designing.
T h e anomalous situation observed
be earlier in specific areas w h i c h are
not able to benefit f r o m the location
and of industries w i l l be largely correct-
ed by such a p r o g r a m m e of general
s k i l l f o r m a t i o n . Sustained mobile
demonstrations. " i n - p l a n f t r a i n i n g
facilities and audio-visual displays,
coupled w i t h basic and multi-purpose
technical schools and polytechnics,
should go a l o n g way in assisting
this process. A l i b e r a l and realistic
p r o g r a m m e for the grant of stipends,
hostel facilities and freeships in
a p p r o p r i a t e cases must also f o r m an
integral part of the programme.
LOCAL SAVINGS
A positive programme for the
p r o m o t i o n of industries, especially
 A u g u s t 2 7 , 1960 THE ECONOMIC WEEKLY

of the small-scale t y p e , at localised A two-pronged attack on the p r o - ous districts may be desirable. In
centres, has the added m e r i t of m o b i - blem is conceivable. On the one any case an assessment of these fac-
lising local savings. Experience in h a n d , consistent w i t h area charac- tors should n o r m a l l y precede the
other d e v e l o p i n g economies of the teristics, evolution of modern indus- d e t e r m i n a t i o n of the area of opera-
West Asian and F a r Eastern coun- t r i a l lines can be i n i t i a t e d at suitable tion.
tries, as in our o w n , suggests that centres; on the other, the t r a d i t i o n a l
local small investors can be persuaded modes of i n d u s t r i a l activities cam be
to invest in local i n d u s t r i a l projects gradually reoriented, with appro- M a n u f a c t u r e of Diesel Rail
because they can observe, and also priate State help f o r o v e r c o m i n g Cars
p a r t i c i p a t e i n , the c o n t r o l l i n g and o p e r a t i o n a l problems and effecting THE question of manufacturing
organisational functions of these lo- positive technological improvements. diesel r a i l cars in the I n t e g r a l
cal projects d i r e c t l y and i n t i m a t e l y , These two aspects should be viewed Coach F a c t o r y , P e r a m b u r , is under
in the absence of local projects, these as an integral part of the overall consideration, but no f o r m a l order
smalt investors are likely either to problem of industrialisation and lias been placed yet. T h i s was re-
h o a r d money, seek m o r e tangible and be co-ordinated as such. vealed by S h r i Shah Nawaz K h a n ,
stable investment outlets as in g o l d
D e p u t y M i n i s t e r of Railways, in the
or real estate or spend on items of EFFECTIVE AREA
Lok Sabha last week. He said that
conspicuous c o n s u m p t i o n . There is no u n a n i m i t y of view on the tentative proposals f o r the T h i r d
As a result of the o p e r a t i o n of the size of the area-unit to f o r m an Five Year Plan of the Railways en-
Plan schemes, there is evidence that effective base for the i n i t i a t i o n of a visaged procurement, of 197 diesel
an increasing n u m b e r of small inves- programme of rural industrialisa- r a i l cars of the f o l l o w i n g gauges:
tors show i n c l i n a t i o n to invest in tion. However. it is generally
67 broad gauge at. an estimated
local industrial projects. Surely, agreed that, by and large, the area
cost of Rs 6.4 lakhs per u n i t ;
any additional social investment of development should be adequate
120 metre gauge at an estimated
w h i c h holds prospects of a t t r a c t i n g enough to sustain i n d u s t r i a l g r o w t h
cost per u n i t of Rs 3.8 l a k h s ; and
significant new p r i v a t e capital in its of an a p p r o p r i a t e order through
10 n a r r o w gauge cars at an esti-
wake can be regarded as sound i n - local raw materials, local skill
mated cost of Rs 2.5 lakhs per u n i t .
vestment even f r o m the angle of and local d e m a n d . The concept
All these rail cars are proposed to
strict 'cost-retiinv considerations. of a self-sufficient village, sus-
be m a n u f a c t u r e d in the Integral
For, the c u m u l a t i v e g r o w t h poten- tained and balanced by the deve-
Coach Factory. Designs to suit i n d i -
t i a l of the economy f r o m such in- lopment of n o n - a g r i c u l t u r a l occupa-
genous m a n u f a c t u r e are under pre-
vestment w i l l be sufficiently higher tions, is speedily (and perhaps hap-
paration.
and the resultant returns in terms p i l y ) being discarded. T h e forces
of increased employment and pro- released by the process of economic
d u c t i o n , significantly r e w a r d i n g . development, the new trends in de-
m a n d , trade and commerce, rapid
COORDINATED PROGRAMME improvements in t r a n s p o r t and com-
F r o m this discussion of the objec- m u n i c a t i o n have tended to expose
tives and their i m p l i c a t i o n s , certain the so-called 'closed' village economy
broad features of the pattern of a to externa! influences. The attempt
programme for rural industrialisa- now is to integrate the economy of
tion can be deduced, ft is borne a contiguous block of r u r a l areas
out by the discussion that dispersal w i t h local urban centres, so that
of i n d u s t r i a l locations in r u r a l areas together they may constitute an ef-
no! only should generally conform fective area of o p e r a t i o n f o r inte-
to the resource-configuration of the grated development. The urban
area, but also be preceded by vigo- areas are visualised as essential
rous p r o g r a m m e s f o r the p r o v i s i o n nuclei f o r the surrounding rural
of social and economic overheads areas, serving as seats of organisa-
and s k i l l - f o r m a t i o n . The p r o g r a m m e , t i o n , outlets and channels of market
besides, should be conceived and f o r i n d u s t r i a l and a g r i c u l t u r a l p r o -
i m p l e m e n t e d as an integrated and duce, sources of raw m a t e r i a l sup-
coordinated scheme of development ply and as centres f o r the dissemi-
of the selected rural areas. The nation of technical and technological
t y p e of industries sought to be deve- know-how.
loped should n o r m a l l y c o n f o r m to,
and be consistent w i t h , the socio-eco- As to how large this 'effective
nomic content of the area concern- area' should be is not a matter to
ed. T h o u g h no p r e c o n c e i v e d for- be decided by considerations of phy-
m u l a o f technology and p r o d u c t i v i t y sical extent but by such situations
should bias the p r o g r a m m e in refe- as resource-configuration, the nords
rence to p a r t i c u l a r areas, neverthe- of an 'economic m a r k e t area', gene-
less, f r o m the v i e w p o i n t of expedi- ral levels of income and standards
ency and objective of development, of l i v i n g and of skill and social and
it is necessary to a i m at relatively c u l t u r a l backgrounds. For e x a m p l e ,
higher f o r m s and levels of technolo- in a few cases, a revenue tehsil may
gical activities. B u t this should be be considered a ' v i a b l e ' area in this
g r a d u a l l y and p a t i e n t l y w o r k e d out. sense; but in others, a few c o n t i g u -

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