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TECH TALK: Transforming Rural India 2: Increasing Market Access

August 7th, 2003 · No Comments

Expanding market access for agricultural and non-agricultural output of rural areas is important for releasing the income poverty constraint. ICT tools such as the internet and the world wide web are ideally suited to achieve this goal.

Much of rural India’s production is handcrafted goods, the market for which is normally restricted to the surrounding areas alone. The demand is consequently very limited and therefore the price obtained is low compared to the potential that could be realized if these goods were taken to a global marketplace. There are many instructive examples of small rural production fetching extremely high prices when exposed to international markets using the internet. (For instance, a small producer of mirror-work neckties in Gujarat was able to advertise her product on the world wide web. A buyer from a department store in London came across the product and placed a large (relative to what the producer normally sold) order. The producer realized a handsome profit, and it was all based on a small investment in cash for the advertisement and a large investment in imagination.)

The rural Indian economy, like that of all developing economies, is largely agriculture based. Increasing the efficiency of markets involved in the inputs for agriculture such as seed, fertilizer, pesticide, and fuel would have serious implications for the incomes of farmers. The use of ICT can remove information imperfections and barriers that account for the inefficiencies in the market. So also, ICT can remove information problems in the output market. Both the input and output markets can gain from the use of ICT tools. A partial list of the information requirement of the agricultural sector is:

  • Prices of inputs and outputs
  • Information on appropriate pesticide for specific pests
  • Fertilizer use and application
  • Weather information

    How TIC and RISC facilitate Market Access

    A RISC provides those services that are usually available in urban areas to a rural population by concentrating resources in a centralized location in a rural region. In effect, the model concentrates economic activity at a location which is accessible to a large rural population to achieve agglomeration economies. It also achieves economies of scope by co-locating a wide range of user services on a standardized platform that provides shared access to basic infrastructural services such as power, telecommunications, the physical plant (building), water, sanitation, and security. Finally, economies of scale are obtained at two distinct levels: at the level of the single RISC, by aggregating a large number of services, scale economies are obtained in the production and delivery of infrastructure; at the level of a large collection of RISC centers, scale economies are obtained by lower transaction costs and the sharing of large fixed design and development costs.

    The RISC is the primary information and transaction access point. It facilitates market access by providing the following services:

  • Market making, market access, market information Efficient markets depend on information. These essential services have the potential to remove current inefficiencies and to expand markets so as to increase incomes.
  • Banking, finance, and insurance Financial intermediation is critical to economic growth.
  • Agricultural extension Agriculture is the backbone of the rural economy. Immense opportunities for income generation exist.
  • Telecommunications, internet and web access To bring the benefits of the revolution in information and telecommunications revolution to rural India.
  • Marketing of consumer goods The supply of consumer goods to rural areas.

    Over time, as WiFi technology is able to provide linkages between the TICs and the RISC centre, the TIC will also become part of the network. This will ensure that technology comes as close to the people as possible, thus making it a utility in their lives.

    Tomorrow: Conclusion

    TECH TALK Transforming Rural India+T

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