TECH TALK: As India Develops: Distribution Hubs (Part 4)

Continuing from the RISC paper by Atanu Dey and Vinod Khosla:

The solution presented in effect solves a constrained optimization problem where the constraints are:

  • Limited resources
  • Large population of 700 million people in 600,000 villages spread over a large subcontinent
  • Very poor infrastructure in terms of power, roads, telecommunications
  • Very low per capita income
  • Very low literacy rates

    With 700 million people in about 600,000 villages, every cluster of 100 villages will have approximately 100,000 people. With 5000 such clusters one can cover most of the rural population. Geographically, if one was to draw 20-kilometer circles one could cover the whole country with about 5000 circles. Most of the population in each circle would be about 10 km from the cluster center, well within a bicycle commute of such a center. 5000 such cluster centers could provide the basis for small, but critical mass towns around which the rural economy could develop. They could provide the infrastructure for power, communication, healthcare, education and government, the services to kick start market economy, sufficient demand for a diversity of services to emerge, and in general be the catalyst, the mixing bowl for our soup so the system can become autocatalytic. The idea is to make available at the center of such a circle all the services and functions that are normally only available in a city. The services are available to the entire population just a bicycle commute away, with a majority of the population within 10 km, and most within 20 km of this center.

    It should be noted that the exact number of such centers is not important and neither is their exact location. Much of this infrastructure exists around existing small Tier III/IV towns (about 4000 of them), the 5000 or so railway stations in the country, the 5000 haats or informal weekly markets that exist. The proposal here is to reinforce these sites with a focusing of most rural investment around these locations rather than scattering them in individual villages. The notion is that this focusing of the investment will result in a critical mass center for each cluster of 100 villages or 100,000 villagers rather than a larger number of sub-critical mass individual villages. The money will get a substantially higher rate of return, spurring economic growth, relative to an even more distributed model. We are in essence proposing that between the village and the megacity, there is an optimal size around 100,000 people (actually a range from 50,000 to less than 100,000) where current investment should be directed.

    The cost of providing basic governmental and non-governmental services like housing, police protection, legal, education, information, communication, regulatory, are much lower and easier than in villages. Most people can have access to these services but they are available at a scale where if demand is small enough resources are not wasted as they would be in the context of the individual village.

    A partial list of essential services (henceforth referred to as user services) would include

  • Market making and access to markets
  • Supply aggregation of agricultural and non-agricultural outputs
  • Demand aggregation of agricultural and non-agricultural inputs
  • Diversity of services to make an autocatalytic soup
  • Education and library
  • Health care
  • Banking and financial intermediation
  • Telecommunications and internet access
  • Governance
  • Entertainment
  • Legal
  • Charity and social services
  • Market information
  • Weather and agricultural information

    The cost of these services will depend on, among other things, the cost of the inputs to provide the services and on the total amount of the services supplied. The costs of the user services (and consequently their prices) depend on the cost of core infrastructural services such as

  • Power
  • Telecommunications
  • The physical plant including building, water, sanitation, security, HVAC
  • Transportation
  • Finance

    If the core infrastructural services are reliably available at low prices, the user services will be correspondingly low.

    The basic function of a RISC is to provide the core set of infrastructural services reliably and inexpensively so that user services that require these as part of their inputs can be efficiently provided and optimally priced. The contention is that reliable, ubiquitous, easily accessible infrastructural services form the platform that can support a full set of appropriate services critical for rural economic development. The critical mass of consumers and producers together with cost effective infrastructure which reduces the cost of services will achieve autocatalytic criticality and hence significantly enhanced economic growth.

  • Tomorrow: Distribution Hubs (continued)

    TECH TALK As India Develops+T

    Published by

    Rajesh Jain

    An Entrepreneur based in Mumbai, India.