Blowing the “two Indias” myth

The new two nation theory is just as wrong as the old one

Roopa Purushothaman deals a severe blow to the “there are two Indias” mantra, in an op-ed in the Wall Street Journal, reproduced in Mint (via Prashant Kothari). Here are some excerpts:

Myth 1: Faster economic growth in urban India, rather than in rural India, is driving rapid migration to the cities. In reality, India’s rural economy has grown on average by 7.3% year-over-year over the past decade, against 5.4% in the urban sector…

Myth 2: Rural India is still an agricultural economy. As of 2000, agriculture accounted for just over half of rural economic activity, down from 64% in the early 1980s and 72% in 1971. Services, on the other hand, now account for 28% of rural activity, up from 21% in 1981, while manufacturing, utilities and construction have nearly doubled their share in the rural economy to 18% in 2000 from just under 10% in 1971…

Myth 3: Rural-urban inequality is on the rise. India’s urban-rural income gap, the ratio of mean urban to rural incomes, diminished to 2.8 in 2000 from 3.3 in the early 1990s…

If there’s a lesson to be learnt from all of this, it’s that urban growth and rural growth aren’t distinct and separate phenomena. Our study suggests that a Rs 100 increase in urban consumption could lead to an increase in rural household incomes of up to Rs 39—no small feedback, and a strong counter to the popular perception of “two Indias”. If India’s cities keep growing at their current pace, in aggregate 6.3 million non-farm jobs in rural areas (more than the total number of new professional services jobs projected over the next 10 years) and $91 billion in real rural household income could be created over the next decade.

Urban consumption also generates non-farm employment. A 10% increase in urban expenditure is associated with a 4.8% increase in rural non-farm employment.

Agricultural growth—even envisaging improved productivity—will not sustain the rural economy on its own. It’s the urban-rural linkages—if understood properly—that could provide a way to solve India’s semi-skilled employment crisis. It’s time to stop talking about “two Indias” and to start framing an economic policy for one country. [Mint]

8 Responses to Blowing the “two Indias” myth

  1. Balaji 10th September 2007 at 22:57 #

    Well, it depends. A better way to define the ‘Two Indias’ will be “One of them is still third world and predominantly speaks Hindi”. No offense to the Language, though.

  2. The Rational Fool 11th September 2007 at 00:29 #

    The golden rule for success has always been to divide India. If you learn from history, you are bound to repeat it!

    On a more serious note, the prices in India have been, and continue to be, so distorted by government intervention in the market, that any rigorous exercise in econometrics is meaningless.

  3. Gaurav 11th September 2007 at 00:41 #

    Wow Balaji classy !

  4. Nitin 11th September 2007 at 05:05 #

    Balaji

    And why should that definition be any less abhorrent and any less a myth than the other one?

  5. Photonman 11th September 2007 at 10:16 #

    Makes you wonder why people took so long to realize this: We are in 2007, and most of the data quoted is until 2000. Surely the data would’ve been available from atleast 2002 onwards?

  6. Balaji 11th September 2007 at 22:59 #

    Nitin,

    >> And why should that definition be any less abhorrent and any less a myth than the other one?

    Is it a myth that the Hindi belt is still behind other states in Economic development? Chandigarh and Delhi cannot offset the chasm we have in the heart of India. How I wish India pro-actively addresses this economic disparity between Hindi and Non-Hindi states.

    The problem here is this false pride which makes us turn a blind eye to the plight of the poor in the Hindi belt. Ex: Entertainment and Tourism are two industries that can employ unskilled labor. How long will it take to create Film cities in say Meerut and Patna? Instead we have schemes like NREG that can only succeed in Non-Hindi states that have a semblance of governance.

    On the other hand, Urban-rural divide is pretty normal and happens in all countries. Infact such divide is not even economics. Its more about services.

    -Balaji.

  7. Gaurav 11th September 2007 at 23:29 #

    Balaji,

    So which world is your TN 2nd, 1st, or is it some even higher place ?

  8. Nitin 12th September 2007 at 13:04 #

    Balaji,

    No, the point that is abhorrent is that the differences in language and economic development justifies dividing them into “Two Indias”.

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