Infrastructural development spurs village economy

| Updated: October 24, 2017 05:31:10

Infrastructural development spurs village economy

Empirics point out that infrastructural development like market links contributes to rural development. It has a positive effect on marketing of inputs and outputs and employment.  
It is obvious that access to paved roads and electricity would impact the crop sector as procurement of inputs and disposal of marketed output are influenced by such development. 
Cropping intensity is estimated to be higher in developed villages - those with paved roads and electricity - compared to semi- and under-developed ones. The reason may be that due to paved roads, developed villages could get inputs in right time and at right prices. Second, we notice that the proportion of irrigated lands doubles in developed villages due to better infrastructure. Again, developed villages surpass all in terms of adoption of modern technology. 
Infrastructural development in those villages has facilitated timely availability of inputs, marketing opportunities and extension services. And finally, over time, yield of paddy has increased much higher than others. Therefore, it appears that rural infrastructure, such as paved roads and electricity, has a close link with productivity of agricultural inputs. 
Agricultural production aside, market links also help welfare of rural households via accumulation of assets over time. Accumulation may take place in both agricultural and non-agricultural sectors. Agricultural asset is relatively low in developed villages; even the accumulation there seems to have decreased. Though in the case of non-agricultural fixed capital, all villages witnessed positive growth, its rate is relatively very high in developed villages. In other words, the need for and accumulation of non-agricultural capital also went up where infrastructure has developed. 
On the other hand, as infrastructure develops, the share of households accessing credit also increase over time.  In fact, the change is evident in other villages but not as remarkably as in developed villages. Again, taking credit availability per household as a criterion in our analysis, we observe no major deviation in the trend. This means, credit availability per household is relatively high in developed villages.
Accumulation of assets is just a necessary condition in enhancing welfare of households; the sufficient condition is the productivity level of assets so accumulated. If productivity - also called output per unit - goes up, the households can enhance welfare by economising the use of scarce resources.  We note that compared to a semi- or under-developed village, the average per capita income in a developed village is about two times larger than others. But this is not the only good news. Over time, the rate of increase in per capita income in developed villages may stand at 7-8 per cent per year as against only 3-4 per cent in other villages. 
What is even more interesting, the per capita income of developed households was lower than others in the base year. But access to roads and electricity has tremendously raised per capita income of non-agricultural labourers. The reasons are not far to seek. Infrastructural facilities have created opportunities for income generation, facilitate market access and develop social indicators. Therefore, from a policy point of view, there is no substitute of infrastructural facilities in raising income in rural areas.
One of the primary impacts of infrastructure may fall on occupational mobility of the workforce in villages. Roads and electricity are supposed to enable workers to work for more hours, help undertake productive pursuits and above all, make information available about work opportunities. The most important effect, however, is the expansion of non-farm activities where surplus labour from agriculture can be absorbed.
We observe that agriculture has lost its importance as a primary occupation irrespective of developed or under-developed villages. The space has been occupied by non-agricultural activities. Existing studies on rural development provide some insight into this 'transformation'. But what is new to us is that as in other societies, infrastructural development seems to inject pace in this transformation. For example, developed villages are reported to lean more on non-agricultural activities. Again, within agriculture, the proportion of workers engaged in cultivation and wage labour is relatively low and has fallen over time.  Thus, the more the access to paved roads and electricity, the more visible becomes the occupational mobility from cultivation and agricultural wage labour to trade/business and to other non-agricultural activities. The findings seem to be in consort with what is observed in other countries, especially in India and China. Second, in terms of multiple occupations, we observe that the degree is relatively low in developed villages. In fact, it increases with under-development of infrastructure. It is not surprising that at a lower level of income, people tend to be engaged in a number of occupations. On the other hand, infrastructure helps to get satisfactory level of income and given a satisfactory income, the substitution effect gets stronger. Thus, infrastructure not only helps raise income of households but also enhances the opportunity for leisure for the workforce.
It is quite natural that infrastructure impacts upon consumption in rural areas through effecting income. In this context, the famous Engel's Law of economics may be effective. We observe that in bad or good times, households in developed villages consume relatively less of rice and more of wheat, fish and meat. Besides, expenses on education, housing and others are also relatively high. That is, access to better infrastructure leads to higher per capita income of developed villages which, in turn, leads to higher consumption of non-rice items. 
The writer, a former Professor of Economics at Jahangirnagar University, is Chair, Department of Economics and Social Science, BRAC University. 
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