'Chicken farming created more jobs than MNREGA'

With about 80 percent of Indian households being wage dependent, Credit Suisse in a report titled ‘The Silent Transformation of India’ has observed that the multi-decade high wage growth for unskilled workers will continue given rising productivity, better wage discovery, and alternative job opportunities.

After several field trips, the brokerage has shown how bottom-up productivity improvement is occurring in India with the spread of rural roads, rural electrification, cell phones etc.

Studying the issue in detail one of the most important sections to boost rural transformation was roads!

“We have found a strong correlation between per-capita output and road networks; represented by vehicle penetration; both within and across states,” says Neelkanth Mishra, analyst at Credit Suisse.

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In Maharashtra, for example, the team found that the per capita Net District Domestic Product is strongly related to vehicle ownership with some 70% of vehicles in the state being two-wheelers.

“As 40% of urban services are low-skilled, this growth is not just rural, but across the bottom of the income pyramid,” he added.

For example, chicken farming or poultry has created more jobs than the government’s social welfare schemes such as MGNREGA. Between 2005 and 2010, 3.8 million people started doing poultry farming and that itself actually created more percentage of work than NREGA, reveals the study. The same is true for vegetable farming and the opening of grocery stores.

“Rural roads are enabling households with even 50-60 square feet of spare land to breed poultry. This yields income of Rs1,000-1,200/month with a starting investment of Rs600. Here’s the surprise: poultry farming created 3.8 mn jobs between 2005 and 2010: the 950 mn person days of work thus created every year is the same as that by NREGA in thesame period,” noted Misra in his report.

[caption id=“attachment_706032” align=“alignleft” width=“380”] Reuters[/caption]

Hence while national rural schemes do drive growth, other structural factors such as rural roads, alternative activities like poultry and vegetable farming, increasing electrification which in turn increases the number of hours worked in a day, water availability, improving cooking gas and cellphones (which have been demonstrated to improve price discovery/stability in fish and agriculture produce) have actually been bigger drivers for growth.

Secondly, rural land pricing is not a bubble despite the sharp increases in the last few years. According to the report, at least 40 percent of Indian households own at least an acre of land and despite falling rental yields, land prices will continue to rise because farming yields as well as prices of agricultural produce have been going up steadily. Moreover, improving road connectivity brings down the arbitrage in land prices between locations, and also allows land to be put to more productive uses such as horticulture, floriculture and poultry and land is not an investment vehicle but a form of savings in rural areas, where regular financial instruments are mostly unheard of.

[caption id=“attachment_705666” align=“alignleft” width=“522”] The villages are urbanising much faster and that is going to sustain growth.[/caption]

The report has flagged six liquid bottom-up stories to benefit from this theme: ITC, Shriram Transport, Emami, ACC, HDFC Bank and Dish TV.

Vignettes from the Credit Suisse team field trips

Pre-stitched branded clothing in a store near you! Just 5-6 years ago few villages had shops for clothes. Cloth shopping was so infrequent for most people as to be limited to trips made to the nearest town. But during the field trip, the brokerage found that all roads leading up to villages had textile shops. More surprisingly, these only stocked pre-stitched clothes-a luxury few years back.

Gulab Jamun instant mix: The second hottest-selling item in a rural grocery store was packaged pre-mix for this delicious but dangerously high-calorie Indian sweet.

The preference for “purity” and “why pay more” has clearly given way to “save time”.

Sony Bravia TV, LG refrigerators and air conditioners in villages: ITC’s Choupal Sagar runs a retail store. Half the store was allocated to white goods, and the store manager said 75% were sold to villagers. Sony service engineers go to villages to install LCD TV sets, and LG service engineers are dispatched to repair broken bulbs in refrigerators. Villages that have 80% of the houses cemented, 6 to 7 grocery stores, a textile store, most houses with motorcycles, and 2% of the households with cars, now being hard to separate from small town India!

The power of plastic: Clear land titles, awareness and more push from the banks have sharply increased the number of Kisan Credit Cards (interest cost 4 to 7%). This has boosted consumption (marriages, education, motorcycle purchases), but also in the cases where this is put to agricultural use, it allows inventory-holding by farmers, thereby improving realizations.

This was near impossible if the farmer had borrowed from the local money-lender.

Data provided by Credit Suisse