Focus on small towns to generate rural jobs


Improving the ease of doing business for small and medium business is key to job creation. Overpopulating cities, shrinking land-man ratio in Agriculture and Jobless growth makes us to look towards small towns for Creating Jobs for Rural People.

Rural-Urban Dichotomy:

Governance systems of India, which had remained stuck in rural-urban dichotomies are unable to leverage the potentials of an agriculture-led, bottom-up urbanisation.

Meanwhile, undetected by the policy ladder, rural India is transforming through informal, local processes. The number of Census Towns increased from 1362 in 2011, to 3894 in 2011.

These settlements meet census norms to be classified as ‘urban’, due to population, density and occupational characters, but continue to be governed as ‘rural’.

Reasons  for looking in small Towns

Shrinking land-man ratio : Shrinking land-man ratio is a prime factor impacting the ability of the agriculture sector to generate more jobs for the burgeoning rural population of India. According to the Agriculture Census 2010-11, the average land holding size is only 1.15 hectares. Cultivation alone can no longer provide livelihood sustenance for 70 percent of those farm households,  who possess  less than one-hectare land holding.

 As per the National Sample Survey (70th Round) estimates, the average monthly consumption expenditure of such marginal farmers is higher than their income through cultivation.

Population : According to the United Nations World Urbanisation Prospects (2018), India’s rural population is projected to climb up from 856 million in 2011 to reach the peak of 909 million by 2027, before starting to slowly taper-off. Although, India is projected to become 50 percent urban around 2045, nevertheless, the rural population would continue to be substantial in absolute number terms,especially in states like UP and Bihar.

No hope for new jobs: As large-scale manufacturing whose projects attract big ticket investments and incorporate latest technologies, cost of capital to cost of labour has drastically come down in recent years, thus raising the attractiveness of bringing in new technology which will kill jobs.

Government Sector: The government sector was once a key source of formal jobs but extensive use of contract employment and outsourcing to private firms, which also hire contract workers, has dealt a severe blow to quality jobs.

Demonetisation: These are the businesses which have traditionally dealt mostly in cash and were the worst affected by demonetisation. But the introduction of GST : GST was the second big shock to small businesses which have only rudimentary accounting systems and absolutely no ability to file documentation online.

Job Potential: Job potential in agriculture and industry is limited, it is the opposite in the case of services. Accounting for the largest chunk of India’s GDP (55 per cent in terms of value added) service sector jobs exist not just in urban and semi urban areas but in the countryside too. Rural labour has been increasingly moving from farm to non-farm activities.

Downgrading Construction Sector: Across the country, the construction sector is a major job creator. But the property sector is down with large unsold stocks and the government’s focus on expenditure control has meant inadequate allocation for infrastructure projects.

Skill Creation: one magic key to job creation is skills creation. In this the Indian administrative system has proved to be woefully inadequate.

MGNREGA: By far the most potent policy weapon for creating new jobs at the bottom of the pyramid which reduces distress is the rural employment guarantee programme (MGNREGA). But here also allocation as well as attention to glitches are inadequate.

Slow take-off: Cluster development schemes to boost rural growth launched earlier, such as 300 clusters, under the Shyama Prasad Mukherjee National Rurbun Mission or 42 Mega Food Parks, had been slow to take-off. The cluster and connectivity centric central initiatives have strong spatial connotations

What steps are being taken by the Govt.

The district administrations have been entrusted as nodal agencies, for planning and implementation. They are required to frame comprehensive business plans and marketing strategies, develop landuse master plans, assess infrastructure shortfalls and figure out training and skill gaps for the local population. Thus, the overarching development plan is not only informed by local priorities, it also ensures closer alignment between economic and spatial objectives.

What more can be done

To fast-track rural industrialisation, generate jobs and growth, the farmer producer organisations, agribusiness entrepreneurs and artisanal clusters need to be strategically located near transportation interchanges in small urban settlements—especially mandi towns, to attain an economy of scale, generate multiplier effects and better supply-chain logistics.

Mandi towns like Ara (Bihar) and Bidar (Karnataka) are linchpins of agrarian economy and are deeply tied with their surrounding rural belt as hubs of agricultural produce marketing, farmer’s cooperative banks, micro-credit institutions and retailing of farm equipment. They play vital intermediary roles in agro-economy value chains linking rural fields to urban markets as nodes of articulation for capital, labour, produce, raw material and information flows.

The spatial targeting of public investments in a strategic manner could kick-off an agriculture-led agglomeration process around the mandi towns and galvanise their rural peripheries in at least three significant ways.

The clustering of artisanal crafts and small-scale agro-processing units offer opportunities for peer-learning and firm to firm knowledge spill-over; facilitating the sharing of orders, contracts, and expensive machineries; reducing transportation costs in sourcing and delivery processes.

Co-location of agro-economy activities could trigger multiplier effect and encourage further investments from related trades such as packaging industries, transportation and logistics firms, agro-machinery dealers and maintenance workshops, as well as off-course support infrastructure in the form of education, healthcare, residential and retail functions.

The agro-driven urbanisation process could stimulate the construction activities in these small towns and generate jobs for the surplus farm-labour from neighbouring villages. Casual jobs in the construction industry has low entry barriers and are vital for the livelihood strategies of the rural poor.

To maximise their growth potential and also contain the adverse ecological fallout of uncontrolled conversion of fertile agricultural land into urban real estate, the agricultural towns and their rural peripheries require to be planned through an integrated spatio-economic framework.

 The PMGSY funds can deliver better value per kilometre, if the rural roads are aligned to strengthen hub-and-spoke connectivity between the agro-processing and artisanal clusters and their supply hinterlands, rather than built in isolation.

The maximum policy focus has to be on improving the ease of doing business for small and medium business, contrary to the focus so far on the demands of the corporate sector which wields substantial lobbying power. It goes without saying that infrastructure for small businesses has to be available at a minimum. Without adequate and affordable power, water and access to roads, neither business nor jobs can prosper. Here local governments have to take the initiative.

Lesson from South Africa

When it comes to integrated planning, South Africa’s recent initiatives could possibly provide certain policy inputs. South Africa’s National Development Plan Vision 2030 articulated the vision of boosting small town economies to address rural poverty. Accordingly, one agro-park cluster is being developed in each of the country’s 44 districts. The centre piece of the programme is the Spatial Planning and Land Use Management Act (SPLUMA), which has put in place an elaborate institutional architecture for horizontal and vertical coordination between various sectoral departments and line agencies for plan implementation.


Rural non-farm jobs and infrastructure investment come together in a key concept propounded by former President Abdul Kalam — providing urban amenities in rural areas. As rural incomes grow demand for non-farm services increases. Technicians who repair cell phones, TV sets and solar panels are in demand. But infrastructure is needed to take these urban amenities to rural areas.