The government should invest in rural infrastructure, especially on construction of roads and providing electricity, with a view to raising income levels of rural households, writes Abdul Bayes
There is a positive link between infrastructural development (especially of roads) and crop production in villages. It is found that developed villages have paved roads and under-developed ones have kutcha ones. It is obvious that access to paved roads has a great impact on the crop sector as procurement of inputs and disposal of marketed outputs are facilitated by such developments. Especially, one can explore the extent of impact of infrastructure development on cropping intensity, coverage of irrigation and yield level of modern varieties of paddy.
Cropping intensity is estimated to be higher in developed villages compared to semi- and under-developed ones. In fact, two decades back, just the reverse happened when these villages were falling behind in terms of cropping intensity. The reason may be that due to paved roads, developed villages could get inputs at proper time and right prices. Besides, the same kinds of benefits have been derived from opportunities created for marketing of output and extension networks. Secondly, we notice that the proportion of irrigated lands has doubled in developed villages due to better infrastructure and surpassed all in terms of adoption of modern technology. Needless to mention, development of roads in those villages has facilitated timely availability of inputs, marketing opportunities and extension services. And finally, over time, yield of paddy has substantially increased compared to others. Therefore, it appears that rural infrastructure, such as paved roads and electricity, has a close link with productivity.
The welfare of rural households also depends on accumulation of assets over time. The accumulation may take place in both agricultural and non-agricultural sectors. We observe that endowment of fixed agricultural assets is relatively low in developed villages; even accumulation there seems to have decreased. But in the case of non-agricultural fixed capital, all villages witnessed a positive growth but the rate of growth is relatively very high in developed villages. In other words, where infrastructure is developed, the need for and accumulation of non-agricultural capital also remain high. On the other hand, as infrastructure has developed, the share of households accessing credit has also vastly increased over time. In fact, the change is evident in other villages but not as remarkably as in developed ones.
Let us now take the issue of human capital. The households in developed villages are ahead of others in terms of accumulation of human capital (number years of schooling by household members). It is very significant since infrastructure has enabled the laggards of the past to move ahead while the relatively advanced ones in the past are falling behind due to infrastructural bottlenecks. It proves that better infrastructure helps educational access. And finally, the share of workers engaged in non-agricultural occupations increase with the development of infrastructure. It is quite likely that paved roads and electricity help access credit facility and strengthen the linkage between farm and non-farm impacts. May be this is the reason why non-agricultural activities are more widespread in developed villages.
We note that compared to a semi- or under-developed village, the average per capita income in developed village is 1.5 times higher than others. But this is not the only good news. Over time, the rate of increase in per capita income in developed villages has stood at 7.0 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 the per capita income of non-agricultural labour. The reasons are not far to seek. Infrastructural facilities create opportunities for income generation, deepen market access and develop social indicators. Therefore, from a policy point of view, presumably there is no substitute of infrastructural facilities in raising income in rural areas.
It is quite natural that infrastructure impacts upon consumption in rural areas through rising incomes. 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 rice and more of wheat, fish and meat. Besides, expenses on education, housing and others are also relatively high. That is, access to better roads leads to higher per capita income of developed villages by creating jobs in non-farm sector which, in turn, leads to higher consumption of non-rice items.
To reiterate, the main benefits of the development of roads in rural areas come from marketing of inputs and outputs. Market orientation has increased over time more in developed villages than in others. On the other hand, distress sales in developed villages have drastically gone down. The reason may be that factors fuelling distress sales have been weakened in developed villages, possibly due to infrastructural development.
We observe that access to quality roads and electricity (or to any of them) is likely to positively impact upon non-farm income of households. The policy implication of this observation is obvious: the government should invest in rural infrastructure, especially on construction of roads and providing electricity, with a view to raising income levels of rural households. It is worth noting that our findings are in consort with those in China and India.
The writer is a former Professor of Economics at Jahangirnagar University.