View: To fuel the economic growth, bring villages closer to towns

By Arun Firodia
The recent reduction in corporate tax rate to encourage investments and attract foreign capital will take some time to show results. But, in the meantime, we still need economic growth to pick up. Economics 101 states growth will create jobs. I have another view: we must create new jobs to stimulate growth.

For this to happen, central and state governments will have to join hands and evolve a joint action plan for short-term and medium-term results. The short-term (results within a year) plans should include solutions for:

The rural economy
India needs to add manufacturing to the still overwhelmingly agricultural rural economy to create jobs. This can be done by setting up units in food processing, dairy, poultry and fisheries. Acold chain will preserve perishables and increase farm incomes. Units for bio-energy, garments, footwear and souvenirs can be set up in barren lands near villages.

Jobs in the services sector, such as retail, mobile and computer repairs, personal grooming, nursing, transport and agri-tourism will also help in development. Provision of urban amenities to rural areas are required beyond, say, 25 km of municipal limits of district towns. But, for this, GoI should give an income-tax holiday for five years, and state governments should grant exemptions from some regulatory permissions and the inspector raj for the same period.

Tier 1& 2 towns
Here again, manufacturing can produce jobs. Fortunately, each district town specialises in some activity — for instance, Moradabad in brassware, Ambala in optical instruments, Sivakasi in fireworks, Tirupur in textiles, etc. They should be allowed to employ contract labour and use active solar power for which incentives need to be given. GoI should declare an income-tax holiday for three years here and state governments exempt some regulatory permissions and the inspector raj for three years.

Metros
Cities can produce a large number of jobs in the services sector like research and development, information technology (IT) and IT-enabled services (ITeS), banking, financial services, tourism, education, media and entertainment, etc.

Fortunately, tech startups are already coming up in these cities. They should be established in or around research institutes like the IITs and IIMs. Angel funds and private equity investors should be offered a place in these institutes.

Medium-term (results within three years) plans should include:

Doubling farm income by 2022:
This government plan means taking 2-3 crops, increasing their yield, and getting better prices from selling them anywhere in the country.

For that purpose, the water table needs to be raised, the best way for which is to harvest the rainwater by digging numerous borewells in nullahs (drains), not to extract but to store the water. Building check dams and farm ponds can also help.

Micro-precision irrigation should further incentivised and expeditiously subsidised. The idea is to get more crop per drop of water. If we can depute one or more persons per district to Israel to work on farms in that country for a couple of years, we can learn techniques to make maximum use of water, even as Israelis get farmhands. Contract farming and corporate farming should be subjected to required safeguards.

Role of banks:
Large banks should take a lead to adopt at least one tehsil per large branch. They should provide loans to each farmer to buy one cow/buffalo/cattle, 10 goats and 100 chickens, along with one electric moped for the farmer to carry his or her produce to the mandi for direct marketing to the urban consumer.

This loan should have a two-year moratorium. Large banks should also establish food banks, each having cold storage facility where farmer could store his or her perishables and food grains till a good rate in the market is found. Against this ‘deposit’, he or she can borrow money at commercial rate for buying seeds for the next crop. Governments will need to help bridge the liquidity gap of the bank.

Tier 1& 2 towns:
These towns can become export centres for their specialised products. A testing facility will help to certify products of their export-worthiness. The export credit guarantee scheme should be extended to these industries along with instant disbursal of export incentives.

Credit should be made available at the London Inter-Bank Offered Rate (Libor)-benchmarked rates.

Regional institutes should start courses jointly with industry to yield skilled manpower to support the local industries become export centres. IT parks are required for BPO (business process outsourcing) centres, while IT R&D centres can offer high-paying jobs.

Growth in rural areas and district towns will, in turn, fuel the growth in metro cities and help reverse the migration from villages.

The writer is chairman, Kinetic Group