RISC Presentation at ISB

Business Strategies for Inclusive Growth RISC – Rural Infrastructure & Services Commons Dr. Atanu Dey Chief Economist NetCORE Solutions Pvt Ltd, Mumbai

The Big Questions
Where’s India today?
Where should it be in 2020?
How do we get there?

Who are you?
Where do you live?
What do you do?
How much do you earn?
You are exceptional

The Present India
Rural areas mostly
600,000 small villages
700 million people
Village-centric agriculture related economy
Guaranteed low productivity and income

A Choice of Futures in 2020
Hundreds of millions living in hundreds of thousands of small villages, engaged in subsistence agriculture?
OR
Living in a large number of medium-sized cities, engaged in non-agricultural sectors?

Development and Growth
Economic development is distinct from growth
You can have one without the other
Economic growth necessary for development if per capita GDP is low
India needs economic growth

Urbanization and Growth
Urbanization is both cause and consequence of economic growth
Cities are Engines of Growth

Engines of Growth
Economies of scale, scope, and agglomeration
Infrastructure has high fixed costs
Range of economic services
Aggregation of people
Specialization and division of labor
Increased productivity
Lowered transaction costs

Rural Development
Rural area development
Barking up the wrong tree
Village-centric development wrong
600,000 is a large number
Rural people development
Urbanize the people

India’s Development
Development of rural people
Economic growth of India
Urbanization of India’s population
Rural – urban migration impossible
Megaslums
Creation of the Engines of Growth

Urban Development
Development of rural populations depends on urban development
Urban planning is the key to rural development
Time to let go of our fascination with village-centric development
We aren’t that rich!

India—Land of Opportunities
Build cities from scratch
Engage the enormous human resources
Take the best from lessons learnt by others anywhere
Use the best state of the art technology and know-how
Build for the future

IMAGINE
Urbanizing 600 million people
600 new large cities of one million people each
Building houses, schools, shopping centers, parks, factories, roads, public utilities, hospitals, libraries . . .
Using the best urban planning known to humanity

UDLG
Urbanization Demand Led Growth
Similar to “ADLI—Agriculture Demand Led Industrialization” – Irma Adelman
Increases aggregate demand for goods and services for building cities
Provides a migration path for labor released from agriculture

Organic Growth of New Cities
Using best urban planning
Seed the cities
Use the best “DNA” evolved so far
Nurture the seed for a time-being
Allow the “tree” – the city – to grow and evolve over one generation

RISC – The Seed
Why RISC
What is the structure
How it will be implemented
The Business Model

Why RISC
People need life and livelihood services
market access, educational, health, financial, entertainment, transportation, and communications
Services require infrastructure
Infrastructure investment is lumpy
Infrastructure investment requires coordination
Coordination failure at the heart of growth

Structure of RISC
Two levels – Infrastructure and Services
Infrastructure Level at the bottom
Building, power, telecom, air conditioning, water, etc
Coordinated investment by a small set of large infrastructure providers
Income from User Services Providers
Services Level above the I-level

User Services Level
Uses the infrastructure services below it and pays for the infrastructure use
Income from user fees for services
Market demand driven set of services
Services income-generating
A complete set of services commercially viable
Large number of services

The Users
RISC located on the site of a “future city”
Within “bicycle commute” distance of about 100 villages
Aggregate population served – 100,000
Aggregated demand for services makes service provision commercially viable

The Growth of RISC
Users gradually migrate to settle around the RISC
The “city” develops according to the urban-planning blueprint
RISC is the catalytic agent which transforms the rural landscape

Economies
Scale
At the services level
At the infrastructure level
Scope
Complete set of services
Mutual support
Agglomeration
Urbanization economies

RISC Features
Ecological set of services determined by the market
Provided by private, public and NGOs
Small set of infrastructure providers
Large aggregate volume of infrastructure
RISC is an aggregation model – supply as well as demand

The Business Model
Initial infrastructure investment made with long planning horizon by a small number of private and public organizations
Large amount of marginal land acquired at low prices
RISC implemented
Land value increases due to improvements
Investment recovered over the long term

The Trick
Grow cities by planting RISCs
Spread risk
Transform marginal rural land into urban land
Recover the investment
No government funding required – only light-handed regulation

The Vision
To look beyond the here and now, and envision the future
Bold, coherent, inspiring and realistic vision of the future
Not the India of today but one of endless opportunities
That vision to guide our purposeful actions

Thank You!
Atanu Dey
[email_address]
Blog:
www.deeshaa.org

RISC Presentation at ISB

by atanudey on Mar 11, 2007

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