Analyzing some aspects of the Rural-Urban Divide:70% of India’s population lives in Villages, but the rural occupation of agriculture contributes to only 16% of India’s economy!‘The Leech Factor.’ That is what the phenomenon of unbalanced area development in India is called among economists and financial analysts. Since our nation’s independence, the government has been streamlining its developmental measures towards our metro cities, largely ignoring the rural area and creating a yawning gap between the urban and the rural masses.
Be it the setting up of multi national companies, of retail showrooms or even, something as primary as the telecom sector, everything first set up shop among the urbanites.The Leech Factor:When the resources in the cities dried up, entrepreneurs moved on to extraction of ram materials from the hugely unexploited rural India. However, the Leech factor, or the process of sucking up the resources from a particular area and using it in another, is being considered as a major deterrent to India’s instable, scattered growth.But now, the time has come for the urbanites to make way for the upcoming small towners or villagers. A large pool of traders, entrepreneurs, industrialists, marketing and warehousing agencies, market intermediaries, professionals, educational institutions, plantations etc are recognizing the potential for profit in India’s lesser known villages. Recent studies indicate that the actual level of non-performing assets (NPAs) in the rural sector is less than elsewhere, and this coupled with the low cost of operations, less expensive labor, infrastructure, cost of living, and so on make Rural India an attractive market.
Bridging the gap:Mr.Shankar of ‘The Hindu Business line’ writes, ‘The rural sector needs timely credit. Due to the failure of the organized sector to make an impact in bridging the credit gap, the informal credit sector has been thriving and is able to lend as high as 24-36 per cent per annum depending on the borrowers’ risk profile. The concepts of lending based on credit history and risk perception being implemented in the organized sector now have been in vogue in Rural India’s informal credit sector for long. Banks need to make loan procedures simple and accessible if they want to make inroads into the rural sector. If banks can offer housing and car loans through simple procedures in urban markets, it is ridiculous to have cumbersome and complicated procedures in the rural sector. Simplification of loan procedures and credit accessibility will attract quality and high net worth borrowers.