Some Thoughts on Rural Development

One of the greatest challenge that India faces is that of rural development. Successfully solving any problem requires a proper formulation of the problem. Fundamental questions arise when the matter of rural underdevelopment is considered in depth. Is rural development the development of rural areas, or is it about development of rural populations? They are not the same thing and require entirely different approaches. Is it possible that the antidote to rural under-development lies in urban development?

Those questions allows us to consider the possibility of addressing the problem of rural under-development by allowing a migration path for the rural populations to areas which have the same characteristics as urban areas. That is, we have 600 million people dispersed over 600,000 villages. Clearly, developing 600,000 locations to become urbanized is not feasible. Transferring the current rural populations into a much smaller number of larger aggregation of people – in effect, urbanizing them – must be the goal because urbanization is both a cause and consequence of development. The problem is then not of developing 600,000 small villages but rather catalyzing the growth of say 6,000 mini-towns of about 100,000 populations each. These mini-towns can then obtain the aggregation and scale economies normally associated with urban areas.

From Development of Areas to Development of People

The contention is that the focus has to change from the development of rural areas to the development of rural people. The development of rural people can be broadly considered as urbanizing them. Since migration of 600 million people into the present set of cities and towns is unfeasible, new aggregations have to be “seeded.” This is the primary role of the government because the seeding implies coordinating the building of infrastructure which will support the rural people.

The problem of rural under-development is then formulated as one which involves the development of urban areas[1]. In other words, for the development of rural people to occur, the focus has to shift from development of rural areas to the development of urban areas. The solution to the development of rural people then is not developed rural areas, but rather developed urban areas.

That is paradoxical at first glance. But the alternative of developing 600,000 villages is an impossibility, as evidenced by the fact that despite enormous resources, rural areas continue to be under-developed. Urban development is a well-understood process and is less costly to the public purse[2] than the alternative of rural development.

There is an instructive example in the development of the US. The US was largely an agricultural – and therefore rural – economy in the turn of the last century. Providing higher education to the children of the rural families was the need. So did they start very little colleges in the tens of thousands of little rural communities? No. They started large universities for the children of farmers to go to. The idea was that these trained people would then go back to the farms and increase the farm productivity. But what was the actual outcome? The children of the farmers got urbanized and did not want to go back to the rural areas. As luck would have it, technologies developed in urban areas were successful in raising farm productivity which meant that so many were not needed in the farms anyway. And who developed the technologies and labored in all those urban areas? Those children of rural farmers who went to the colleges were the people who supplied all the necessary bits that the rural farmers required.

The point is that it was not rural development that made the difference in the rural areas. It was what happened in the urban areas that changed the rural areas.

Role of the Government: Infrastructure Investment

The role of the government is critical in rural people development through urbanization. Public investment in infrastructure “crowds-in” private investment in infrastructure and other services. The government has to play the role of the “lead investor” that signals to the market that investment in the projects will be profitable.

Infrastructure services require high fixed costs and have long pay-back periods. The role of the government is then one of financing the infrastructure, and leaving their provisioning to the private sector.


  1. RISC (Rural Infrastructure and Services Commons) is a model which achieves rural development through urbanization. In the RISC model we call it “in-situ” urbanization. Sure, these “urban centers” are located in the rural area. But it does not transform villages at all directly. It creates a mini-city. It is not kiosks in every village but rather villagers in cities that will transform the people. The focus is on the services available to the people rather than attempting to locate the services in villages.
  2. It is less costly to the public purse because private sector firms would invest in the infrastructure to serve a dense concentration of people (as in any urban area) more readily than they would in sparsely populated rural areas.