28 November 2010

Agriculture and Rural Development (ARD) in India

We have seen how agriculture and rural development are both essential for the industrialisation of India. In fact they are closely linked to each other. They are two sides of the same coin. Instead of talking about "agriculture" and "rural development" as two separate entities, it makes sense to talk about them as one entity: "agriculture and rural development" (ARD).

27 November 2010

The Importance of Rural Development in India

Development/industrialisation is accompanied by urbanisation. So we should focus on urban development, not rural development. Right? Wrong!

1. Improving agriculture is a must for industrialisation. Agriculture is carried on in villages, so rural development is needed to improve agriculture.

2. Industry needs a literate labour force. But most of the people live in villages (70% in India). So rural development is needed to increase the education level of the majority of the population.

3. Finally, rural development is needed to reduce the migration of people from villages to cities. The current rate of rural-to-urban migration in India is unsustainable. It is much more than the rate at which industrial jobs and urban infrastructure are growing. So rural development is a must to slow down the rural-to-urban migration.

Here is another argument for rural development (based on the factors of production).

26 November 2010

Agriculture and Industrialisation in India

Earlier I had said that development of agriculture is a pre-requisite for industrialisation. Let us look at this claim in more detail.

What are the requirements of industry?
1. Capital
2. Labour
3. Market

1. Capital: Improvement of agriculture increases output and thus creates the capital needed for industries. This is particularly important in the initial stages of industrialisation, when the industrial sector is small and the economy is pre-dominantly agricultural.

2. Labour: Industry needs literate workers unlike agriculture, which can manage with illiterate labourers. In an agricultural country, a vast majority of people are illiterate (40 crore in India). Education depends on income. So to turn the illiterate agricultural labourers into literate workers for industry, we must first increase their incomes. That is, we must increase the productivity of agriculture (Wage = marginal productivity of labour).

3. Market: The purchasing power of people must be increased so that they can buy the products made by industry. Most of the people are employed in agriculture (50% in India today). Hence we must increase agricultural incomes by improving agricultural productivity.

One can argue that requirements 1 and 3 are not absolute. Capital can be got from other countries (foreign investment). Goods can also be sold in other countries (exports).

But requirement 2 still remains. If nothing else, agriculture must be improved to raise the income, education and health of the majority of the people – who work in the agricultural sector. By the way, this is not just to make people eligible workers for industry. This is also why we are industrialising in the first place. In other words: health, education and income are both the ends and the means of development/industrialisation.

That is why development of agriculture is a must for India to industrialise.

21 November 2010

India's Role in the Industrial Revolution

The Industrial Revolution happened in Britain during 1775–1850. It gave birth to modern industry – a new system of production based on machines and factories. For the Industrial Revolution to happen, three things were needed:

1. Capital – to build the machines and factories
2. Raw materials – to produce the goods in the factories
3. Market – to sell the manufactured goods

All three were needed in large amounts for the Industrial Revolution to kick off:

1. Capital: After the Industrial Revolution started, the huge profits it generated could provide the capital for further industrialisation. That is, the process could become self-sustaining. But how was the process to begin in the first place? Where could such a large amount of money be got from?

2. Raw materials: The Industrial Revolution needed vast amounts of raw materials at cheap prices. Where were they to be got from?

3. Market: Finally, a vast captive market was needed to sell the manufactured goods at a handsome profit. Where was it to be found?

The first country to answer these three questions would be the birthplace of the Industrial Revolution. In the second half of the 18th century, one country did find the answer to these three questions: Britain. And its answer was India.

On 23 June 1757, the English East India Company defeated Siraj-ud-Daula, the Nawab of Bengal, in the Battle of Plassey. The British thus became masters of east India (Bengal, Bihar, Orissa) – a prosperous region with a flourishing agriculture, industry and trade.

The East India Company started collecting revenue from this region and sending it to Britain. This provided the capital. It also started seizing raw cotton from the cotton farmers and sending it to Britain. This provided the raw material. Finally, it brought the manufactured textiles from Britain into India – without any duties or tariffs – and sold them here. This was their free market.

Thus India provided all the three ingredients of Britain's Industrial Revolution: capital, raw materials and market.

It is not a coincidence that the Industrial Revolution began less than 20 years after the British conquest of east India. Nor is it a coincidence that the engine of Britain's Industrial Revolution was its textile industry. Before the Industrial Revolution, India was the world's number one textile manufacturer and exporter. When you have conquered a country, what better industry to enter and dominate, than the industry dominated by the country you now rule – and whose economy you now control?

Subsequently, of course, Britain conquered the whole of India, thus giving it more capital, more raw materials and a larger market – which helped to accelerate its Industrial Revolution. Needless to say, India's economy was devastated in this process.

Thus the Industrial Revolution was built on the grave of the Indian economy. The Industrial Revolution was made in Britain, but it was funded by India (against her will).

The Industrial Revolution gave birth to the Industrial Age, or the Modern Age. Thus, though the Modern Age was inaugurated in Britain, the real driving force behind it was India.

That was the role of India in the Industrial Revolution (and consequently, the birth of the Modern Age).

Thus Britain did not "make India modern". The truth is the other way around. It was India that helped Britain to become modern.

15 November 2010

Mr Rahul Gandhi's Education (and Report Card)

Q: What is Rahul Gandhi's education?
A: He did his M.Phil in Development Studies at Trinity College (Cambridge University) in 2005.

Here is his report card:

Development Economics65%
Institutions and Development62%
International Economic Integration66%
National Economic Planning and Policy58%

14 November 2010

The Importance of Studying History

Q: What is history?
A: History is the study of man's past.

Right? Wrong!

History is NOT the study of the past.
History is the study of the present.
It is the study of how the present has evolved from the past.

The past is not the end of history. It is only the means.
The end of history is the present.
By knowing the past, we can understand the present.

History is also the study of the future. If we know how the present has evolved from the past, we can also know how the future will evolve from the present.

That is why we must study history.
Not to know the past.
But to understand the present.
And to anticipate the future.

That is the importance of studying history.

12 November 2010

The Three Periods/Stages of India's History

India's history can be divided into three periods or stages:

Politico-Economic System
Dominant Religion
1. 3000 BC – 712 AD
2. 712 AD – 1947 AD
Islam + Christianity
3. 1947 AD – today