Dec. 31 (Bloomberg) -- For three decades, Indian rice farmer Lahu Bhiwa loaded his grain onto an ox cart and sold it to families in his village, earning about 2,000 rupees ($32) a month. His life changed in 2010, when bulldozers cleared a new road that has helped triple his income. The smooth asphalt linking Kainad with the western Indian coastal town of Dahanu turned a three-hour journey by foot into a 25-minute car ride. Access to more buyers allowed Bhiwa to sell goods to the highest bidder, giving him enough cash to buy a mobile phone and check benchmark prices. His son now attends school in Dahanu, an opportunity unavailable a decade ago. “Our life has completely changed for the better ever since this road was built,” Bhiwa, 45, said as he watered his land in the village. “Before, we were at the mercy of middlemen who would come here and take our produce. We had no way of knowing whether the prices they offered were good or bad.” The construction of 600,000 kilometers (373,000 miles) of country roads, addition of 327 million rural phone connections and a rise in literacy to record levels since Prime Minister Manmohan Singh took office in 2004 has helped double the growth rate of India’s food output. The productivity boost has prevented a deeper slump in Asia’s third-biggest economy and may bring votes to Singh’s ruling Congress party in a 2014 election even as growth lingers near a 10-year low. “What we see is a fundamental break from the past,” said Ganesh Kumar, an agricultural researcher who teaches at the Mumbai-based Indira Gandhi Institute of Development Research, which is funded by the nation’s central bank. “Higher farm output has kept rural demand alive and kicking, and that definitely helped the economy from a much more severe deceleration.”
Food output increased 24 percent between 2001 and 2011, double the growth rate of the previous decade, and reached a record 259 million tons in the crop year ending June 2012, the latest year for which the Agriculture Statistics Division has data. India led the world in rice exports for the first time ever last year.
The rural road network increased to 2.75 million kilometers in 2011 from 2.14 million kilometers in 2004, more than double the annual average over the second half of last century, according to government estimates. Rural phone connections rose about 30-fold to 339 million by the end of last year from 12.3 million in 2004, according to the latest statistics from the Ministry of Communications and Information Technology. Literacy in agrarian areas improved twice as much as in urban centers in the decade to 2011, with the rate of those who can read and write rising to 69 percent in 2011 from 59 percent in 2001, census estimates show.
“These once-in-a-lifetime changes are happening at the bottom of the pyramid due to a dramatic improvement in roads and phones,” said Neelkanth Mishra, head of Indian equity strategy at Credit Suisse Group AG who co-wrote a March report on rural development. “Contrary to popular belief that growth in all things rural is driven by unrestrained government spending, we believe the changes are already showing signs of being self- sustaining.”
Kainad sits between lush green rice fields and fruit orchards, about 175 kilometers (109 miles) north of Mumbai, India’s financial capital. Oxen mill throughout the sprawling tribal village of about 9,000 people, which is divided into clusters of thatch-roofed houses. It has no high schools.
Before the road was built, farmers mostly grew rice, as transporting goods carried prohibitive costs. Monsoon rains flooded low-lying areas, leaving Kainad isolated. When a villager fell ill, four men would need to carry the person on a hand-made wooden stretcher to the hospital in Dahanu about 12 kilometers away.
Signs of modernity began to appear in 2008, when Vodafone Group Plc, India’s second-biggest mobile-phone operator by subscribers, put up a tower in the area. Once the road came two years later, farmers could easily get to town to buy seeds and fertilizer.
Bhiwa and others started growing crops that fetched more cash, including chillies, coconuts, gooseberry and sapota, a fruit similar to a pear. Teenagers could access high schools in Dahanu, allowing them to continue studying beyond the age of 13.
“Earlier, farmers here were limited only to a small area,” said Kalpana Prakash Khapade, the headwoman of Kainad. “Now, the entire world is open to them.”
Mangal Ramji Dhinde, 36, saw another way to make money. With savings from his work as a tailor, he bought a Tempo, a four-wheeled truck made by Mahindra & Mahindra Ltd. Soon he was hauling crops to Dahanu, which has five times as many people.
“Now farmers don’t use ox carts -- a majority of them call me to ferry their farm produce,” Dhinde said, adding that his sons took over the tailoring shop. “It’s a win-win situation.”
Many in Kainad lauded Singh for the changes and said they plan to support his Congress party in elections due by May, counting themselves among the rural voters that form its base.
The opposition Bharatiya Janata Party, which advocates fewer government giveaways, says it deserves credit for the rural makeover. Opinion polls show the BJP will win the most seats in the elections while falling short of a majority.
In 2000, BJP leader and then-Prime Minister Atal Bihari Vajpayee started a program to connect villages with at least 250 people with all-weather roads. After winning office in 2004, Singh’s coalition government adapted the program and folded it into a wider anti-poverty effort.
“Our policies laid the foundation for deepening rural telephonic penetration and cutting rural poverty,” Prakash Javadekar, a BJP spokesman, said by phone.
India, home to the most poor people on earth, has seen the number of rural people living on less than 816 rupees ($13) per month -- the official poverty line -- fall by about a third during Singh’s tenure to 217 million people in March 2012, according to Planning Commission estimates. Rural wages after inflation rose 6.8 percent per year on average in the five years through March 2012, after falling 1.8 percent in the previous five years, a Ministry of Agriculture report showed.
Singh more than doubled the guaranteed support prices for wheat to 1,350 rupees per 100 kilograms in the year ended June 30 from 2005-2006, and boosted rice paddy prices to 1,250 rupees from 570 rupees in the period. He started a program to employ one adult in every poor rural household for a minimum of 100 days a year, and enacted a law that will provide cheaper food to about two-thirds of the country’s 1.2 billion people.
Critics say the measures are unsustainable, and India is now paying for them in the form of slower growth and rising prices of onions, potatoes and other staples. “The problem is that policy makers focused too much on stoking demand,” said D.H. Pai Panandiker, president of the RPG Foundation, a New Delhi-based economic research group. “The result is imbalances in the economy, now showing up in very high inflation and current-account deficit.”
India’s consumer-price inflation accelerated past 11 percent in November, the fastest in a basket of 17 Asia-Pacific economies tracked by Bloomberg. The current-account deficit widened to $88 billion, or 4.8 percent of GDP, in the 12 months to March 2013, from $78 billion in 2011-2012.
The currency has weakened about 12 percent versus the dollar in the past year, the third-most in Asia after Indonesia’s rupiah and Japan’s yen. The economy has grown at a rate below 5 percent for the past four quarters, after peaking at 11.4 percent in the three months ending March 31, 2010.
“The issues are complex, and it is much easier to blame the government than to understand them,” Singh said at a party meeting on Dec. 18, according to a transcript on CNN-IBN’s website. “The worry about inflation is legitimate, but we should recognize that incomes for most people have increased faster than inflation.”
In Kainad, villagers have been struck by the jump in land prices. An acre now goes for 1.5 million rupees, about seven times more than before the road’s construction three years ago, according to Dilip Choradia, a 58-year-old farmer.
So far, the higher food prices haven’t deterred farmers from spending their new-found cash on consumer goods. Many houses have television sets, and youngsters aspire to buy motorcycles.
“When you have production throughout the year, you get a much better price and much more money,” Choradia said. “This road has become our lifeline.”
--Editors: Daniel Ten Kate, Sam Nagarajan