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TECH TALK: As India Develops: Distribution Hubs (Part 2)

April 12th, 2004 · No Comments

RISC (Rural Infrastructure and Services Commons) is an economic model for the transformation of Rural India, proposed by Atanu Dey. According to Atanu: Fundamentally, the specific market failure that RISC addresses is that of coordination failure. RISC is designed to coordinate the activities of a host of entities-commercial, governmental, NGOs. It synchronizes investment decisions so as to reduce risk. It essentially acts as a catalyst that starts off a virtuous cycle of introducing efficient modern technology to improve productivity that increases incomes and thus the ability of users to pay for the services, and so on. It creates a mechanism that reduces transaction costs and therefore improves the functions of markets.

Atanu and Vinod Khosla co-authored a paper on RISC in August 2003. The monograph outlines the challenges in dealing with rural India and a framework to solve the many inter-linked problems to build a new urbanised rural India.

The economic development of Indias 700 million strong rural population presents formidable challenges and also great opportunities. A model called RISC Rural Infrastructural & Services Commons is presented that has the potential for achieving the multi-faceted goals of sustainable economic development through more efficient utilization of available resources by focusing them into a minimum viable economic size. Five thousand such rural centers, built around existing infrastructure like railway stations, haats (informal weekly markets currently in operation in rural India), or Tier III/IV towns could place most of the rural population within a bicycle commute of ACCESS to many modern resources (like power, communications and education). The model calls for concentrating existing and ongoing investments into critical mass population chunks rather than spreading them out into individual villages in uneconomic sizes and at exorbitant cost. Then it allows the invisible hand of markets, not planned activities or industries, to drive growth, and direct resource usage on an economic basis.

The basic premise of this model is that markets can be enabled or made far more efficient in rural India. The set of activities for these markets and the capabilities are different from those of the national or global economies. Local development matched to the skills, resources, capabilities and infrastructure of rural India and its local markets is the first stepping stone to participation in the national and global economies.

Fundamentally, the model focuses on all investments in critical mass chunks (minimum economic size) in scale and diversity, and allows for the use of these resources by the highest economic use, while providing most rural Indians with ACCESS to facilities they need rather than spreading them out into individual villages in uneconomic sizes and at exorbitant cost. It essentially acts as a catalyst that starts off a virtuous cycle of introducing efficient modern technology and aggregating demand to create markets and to improve product diversity, competitiveness and productivity that increases incomes and thus the ability of users to pay for the services. It creates a mechanism that reduces product costs, transaction costs, improves information and knowledge and therefore improves the functions of markets. An efficient market with sufficient scale and product and services diversity will make the economic system autocatalytic.

Revolutions in the information and communications technologies have the potential to remove the information asymmetries that are impeding the working of markets that are critical for economic growth. The forces of globalization have created opportunities for the integration of rural populations in a larger marketplace than was ever available to them before, and more importantly, in the rural context of local markets, local product needs, using local skills. In this context it allows for a gradual increase in skills and market and production efficiency mechanisms like information, knowledge, education, specialization, scale etc. Full participation in the global economy is not required or necessary in our view, in one step. Rural economic activity can access and make selective contributions to the global economic products and services.

Tomorrow: Distribution Hubs (continued)


TECH TALK As India Develops+T

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