The Gist of Kurukshetra: May 2015

The Gist of Kurukshetra: May 2015

Rural-Urban Linkages and Socio- Economic Development

Rural-urban linkages are both a cause and a consequence of socio-economic development. It includes flow of agricultural and other commodities from rural based producers to urban markets. These commodities for local consumers and for forwarding to regional, national and international markets on one hand and on the opposite side flow of manufactured and imported goods from urban centres to rural settlements. It is now widely recognised that there exists an economic, social and environmental interdependence between urban and rural areas and a need for balanced and mutually supportive approach to development of the two areas. Agriculture is an important part of rural economy and change in agriculture can influence the non-farm activity, mainly in three ways: through production, consumption and labour market linkages.

Production, a growing agricultural sector needs technical inputs of fertiliser, seeds, herbicides, equipment and repair services either produced or distributed by non- farm enterprises.

Consumption linkages arise when increasing farmer income, as a result of growing agriculture, boosts the demand for basic consumer goods. Such a demand typically increases over time as the rising per capita income induces the diversification of consumption into non-food items.

Rising agricultural wages in the rural areas have raised the opportunity cost of labour in the non-farm activities. This has induced a shift in the composition of non-farm activities from labour intensive, low-return ones to those that require more skilled labour and higher investment and produce higher returns.

They also include flow of people moving between rural and urban settlements, either commuting on a regular basis, for occasional visits to urban-based services and administrative centres, or migrating temporarily or permanently. Flow of information between rural and urban areas include information on employment opportunities for potential migrants. Financial flow include, primarily, remittances from migrants to relatives and communities in sending areas and transfers such as pensions to migrants returning to their rural homes and also investments and credit from urban-based institutions.

Infrastructure plays the key role in promoting agricultural and rural development which is the basis of rural economy of a developing country like India where, infrastructural facilities are generally weak and inadequate and many people, especially the rural poor do not have access to even minimum infrastructure services. Good infrastructural facility not only ensures smooth flow of inputs and outputs but also facilitates higher accessibility to knowledge, market, remunerative prices and savings from wastages. Exchange of goods between urban and rural areas are an essential element of rural-urban linkages. The ‘virtuous circle’ model of rural-urban local economic development emphasises on efficient economic linkages and physical infrastructure connecting farmers and other rural producers with both domestic and external markets. This involves three phases:

  • Phase I: Rural households earn higher incomes from production of agricultural goods for non-local markets and increase their demand for consumer goods
  • Phase II: Increasing demand leads to the creation of of non-farm jobs and employment diversification.
  • Phase III: Employment diversification in turn absorbs surplus rural labour, raises demand for agricultural produce and again boosts agricultural productivity and rural incomes.

However, access to urban markets is key to increasing incomes for rural and semi-urban farmers. Three aspects are crucial for access to urban markets:

  • physical infrastructure (road networks and affordable transport)
  • relations between producers, traders and consumers; and
  • information on how markets operate, including price fluctuations and consumer preferences.

Most individuals or households in low-income countries straddle the rural-urban linkages through income and occupational diversification and migration. Time devoted to, as well as the income derived from, non-farm and off-farm activities are therefore substantial parts of the lives of rural households. The most successful rural households use urban opportunities and exploit urban niches in addition to agricultural land resources. Most of the poor as well as rich households combine agricultural production with non-farm and off-farm income-generating activities to increase their income. The access of rural people into non-farm activities has only been possible where there is availability of non-farm employment opportunities that arise from urbanisation, innovations and sectoral transformations. In addition, new investments in non-farm sectors take place with an increase in farm incomes and rural savings. As farm income grows, the demand for non-farm goods and services increases in rural areas. To meet this demand, rural economic activities are diversified into production of rural non-farm goods and services.

Transformations in the ways in which households and individuals make a living are perhaps the most striking aspect of rural-urban linkages and in many cases, involve multiple occupations ranging from farming to services. The rural households rely on non-farm and off-farm activities as well as migrant members’ remittances. The non-farm activities of rural households are part of a survival strategy that aims to reduce risk, overcome seasonal income fluctuations and respond to external and internal shocks and stresses - e.g., economic and financial crises.

Emerging employment opportunities in urban areas in combination with affordable transportation services, have increased mobility or migration, which has facilitated income diversification. Gender and generational relations are also important in shaping rural-urban linkages, as reflected by the higher levels of multi-activity among the younger generations.

A rise in the income levels of the rural population due to the diversification of their livelihoods would not only increase demand for manufactured goods and services among these populations, which would in turn stimulate the growth of local towns and urban areas, it would also trigger agricultural growth.

As households took over responsibility for farming, production levels increased and in high-potential regions, this contributed to a decline in rural poverty and to increased demand for non-agricultural goods; at the same time, however, land scarcity gave rise to unprecedented migration to small and large urban centres. Mobility and migration are closely interrelated with livelihood diversification. Access to affordable transport expands the opportunities to find employment or to engage in income-generating activities through commuting. Internal migration is often seen as essentially rural-to-urban and contributing to uncontrolled growth and related urban management problems in cities.

Whilst, to some extent, flows and linkages exist between all rural and urban areas, their scale and strength are determined by the nature of economic, social and cultural transformations. The liberalisation of trade and production has changed or reshaped rural-urban linkages in most regions at the global level. The increased availability of imported manufactured and processed goods affects consumption patterns in both rural and urban settlements. These goods are often cheaper than locally produced which can affect local manufacturers and processors negatively. This is especially for small-scale enterprises using traditional or limited technology.
Increased access to information on distant places has an important role in younger generations desire to migrate and to move out of farming in favour of more “modern” types of employment. Changing employment opportunities can have a profound impact on traditional social structure.

At the local level, the nature and scope of rural-urban interactions is influenced by several factors, ranging from geographical and demographic characteristics including the nature of agricultural land, population density and distribution patterns of farming systems to the availability of roads and transport networks, linking local settlements to a number of urban centres where markets and other services are located. Local government and other local actors are best placed to identify local needs and priorities and provide an adequate response to them.

Rural – Urban Linkages: An Overview

A number of developments regarding rural- urban linkages have been observed in the last decade. Firstly, the implementation of structural adjustment policies, especially India has forced many urban households to seek additional sources of food and income, including urban agriculture. Increasingly, high and middle-income households are also engaging in urban agriculture to supplement declining incomes. Secondly, retrenchment and deepening of urban poverty occasioned by structural adjustment has triggered a process of ‘return migration’, with households returning to their rural homes in order to survive. Thirdly, urban-to-rural household remittances are declining, while the ability of poorer urban household to import food for their own consumption from their rural relatives is increasingly difficult due to spiralling costs of transport. Fourthly, in a number of countries, large numbers of temporary agricultural workers employed by commercial farms, especially during the harvest season, are urban-based, giving rise to a diversification of income sources among poor urban households. Fifthly, globalization is creating new forms of linkages for small towns and rural areas, often referred to as the ‘rnetropolization of the world economy’. A web of horizontal and vertical networks among settlements is emerging, fuelled by recent technological advances in information and communication technologies.

Pro-rural and pro-urban arguments have had a strong influence on development strategies. Among international development agencies, for example, investments in rural and urban areas have sometimes been seen mutually exclusive and competing. Investments in rural areas have often aimed at reducing rural-to-urban migration, while urban investments are often interpreted as urban bin. Some support policies aimed at reducing rates of rural-to- urban migration, while others regard such policies as futile, accepting rapid urbanisation as inevitable even if not desirable. Evidence supports the latter point of view.

A number of policy lessons have been learnt over the last few decades:

(a) Rather than treating rural and urban as different and competing development spaces, they should be seen as a whole - and linkages should he strengthened. The most important rural-urban flows are economic and demographic, and policy responses which centre on the provision of infrastructure have often been inadequate to solve the structural problems of either.

(b) Economically, rural and urban areas are linked by the reciprocal exchange of unprocessed and processed products, with both areas acting as mutually reinforcing markets, strengthening this linkage requires, in many countries, the decentralisation of urbanisation through the promotion of medium-sized cities.

(c) However, regional policies alone will neither succeed in transforming the lives of the poor nor eradicate rural-urban inequalities. Regional, economic and spatial policies need to be part of general national development programmes to reduce poverty through different sectoral strategies, such as land redistribution, improved access to credit, health and education, amongst others. In orderto reduce poverty and inequality, sectoral policies needto address the main reasons underlying poverty. Including; (i) urban and rural landlessness and insecurity of tenure; (ii) unfair terms of trade between urban and rural areas: and (iii) insecurity of income, largely a result of unemployment and under employment in urban and rural areas and partly resulting from lack of diversification of income sources:

(d) More emphasis should be placed on addressing urbanization-related problems such as high urban unemployment rates, pressure on urban infrastructure and services, and labour shortages within rural areas. However, rural-to-urban migration often has positive impacts, since towns and cities take on an important role in absorbing excess population from overpopulated and ecologically fragile regions.

(e) Further, urbanisation is not simply the growth of populations living within legal-administrative boundaries of towns and cities. It also transforms both urban and rural lifestyles. By the 20th century technological improvements, initially in transport but more recently in information and telecommunication, have allowed people in rural villages to become urbanised without necessarily migrating to towns and cities.

Rural - urban linkages need to be understood and addressed in the context of increasing global urbanisation. The strength of these linkages will, to a large extent, determine the living conditions of people in both urban and rural areas. Towns, cities and villages are all experiencing significant socio- economic and spatial transformations that are likely to intensify during the first few decades of the new millennium.

The impact of globalisation on small towns and villages is an issue that needs to be analyzed and appropriate policy responses formulated. It is already clear that policies encouraging both horizontal and vertical linkages with settlements at the regional (sub-national), national and international levels will be necessary to improve the competitiveness of small towns and rural regions. It is no longer a question of how they integrate into the national economy, but how they do so in the global economy as welI.

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