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Palanpur, a fascinating story of income growth, social change

Niranjan Rajadhyaksha
This Uttar Pradesh village offers a microcosm of the broader change in Indian villages since independence

Palanpur is a relatively unknown small village in Moradabad district of Uttar Pradesh. However, it has a special place in development economics because of a research project that has stretched over seven decades. Economists have conducted seven detailed surveys of Palanpur since the 1950s, a rare longitudinal database that shows how the village has changed over three generations.

The Palanpur surveys offer us a microcosm of the broader change in Indian villages since Independence. They also have contemporary resonance when rural distress has become a hot-button political issue. The research conducted by some of the best development economists of our times thus deserves to be read more widely.

I recently bought the new edition of a book edited by Peter Lanjouw and Nicholas Stern on five decades of change in Palanpur, even as the results of the latest survey conducted in 2015 are filtering into the public domain. The broad story of Palanpur has been one of income growth as well as better social indicators over the past seven decades. Poverty has declined but the downside is that inequality has increased because some social groups have adapted to change better than others.

Economic growth in Palanpur was initially driven by agriculture. The abolition of zamindari gave tenant farmers incentives to invest in the land. It is worth recalling that the early development plans looked at agriculture as a bargain sector, where productivity could be increased through institutional policies rather than large allocations of money. The next boost to farm incomes came from the Green Revolution, as new seeds, irrigation and farm machinery raised productivity. However, the greater capital intensity released farm labour for other types of work. The second phase of income growth was thus driven by activities outside of agriculture, primarily services, construction and other work linked to agricultural production. The Palanpur economy diversified.

The absorption of excess labour during the rural construction boom is a well-known story. Most of the workers who moved out of farming in Palanpur have been absorbed in informal enterprises, though there is not much manufacturing. It may be different in other parts of the country, where rural manufacturing has a much greater role to play in absorbing excess labour. For example, a paper by Ramesh Chand, S.K. Srivastava and Jaspal Singh of the Niti Aayog estimated that more than half of Indian industrial production comes from rural areas.

The rural economy is not just about farming any longer. Non-farm income accounted for 13.23% of total income in Palanpur in 1957-58. That rose to 46.36% in 2008-09. It is quite likely that less than half the total income in Palanpur is now from farming. Equating the farm economy with the overall rural economy is no longer valid, though the links between the two are very strong.

Most households in Palanpur now have multiple sources of income, a hard fact noticed by economists even among the urban poor. There are two ways of looking at this. The positive take on this is that diversified income streams offer protection against sudden shocks to any one activity. The negative take is that the poor do not have the opportunities for specialization and thus higher productivity. The economic change has also led to profound social change in Indian villages such as Palanpur. The farming castes were the natural beneficiaries of the first phase of development led by agricultural progress. Other caste groups have benefitted from the next phase of growth that has come from activities outside farming.

Some marginalized communities have grabbed the opportunities provided to work at higher wages either in non-farm enterprises in Palanpur or in nearby towns that are now more accessible. Some entrepreneurial castes have also benefitted from the more recent growth process. The slide deck of a presentation recently made by Stern and Himanshu at the Institute of Development Studies in the UK provides insights from Palanpur that can offer us important clues about why the farming castes locked to the land are now demanding reservations in various states.

The Palanpur studies paint a complex picture of economic progress, social change and political fissures. Caste inequities persist. Women continue to get a bad deal. However, it is also true that economic change has opened up new opportunities for social mobility. The importance of mobility, connectivity, communication and markets as important instruments of social change comes out strongly.

We live in the age of big data but the research on Palanpur also tells us that thick data from ethnographic or microeconomic studies can also tell policymakers a lot. It is said that the great development economist Ian Little had an epiphany about the inefficiency of Indian planning while studying an industrial project in Bhopal in the 1960s.

A recent conversation with an economist friend ended with an agreement that a novel such as Raag Darbari by Shrilal Shukla should be added to the reading lists for development economics courses in India. The same can be said about the Palanpur studies.

Niranjan Rajadhyaksha is research director and senior fellow at IDFC Institute. Read his previous columns at www.livemint.com/cafeeconomics