Atanu Dey-Vinod Khosla Marshall Plan

By Atanu Dey, Guest Author

India’s economic growth depends critically on the development of its
700-million strong rural population living in 600,000 villages. The
challenge is to manage their transition from a village-centric
agricultural-based economy to a city-centric non-agricultural economy
urgently.

Economic growth is both a cause and consequence of urbanization.
Cities are engines of economic growth because they give rise to
economies of scale, scope, and aggregation. The aggregation of supply
and demand for economic goods and services (and thus for
infrastructure) which accounts for cities. Availability of low cost
infrastructure in turn makes the availability of a wide range of
services possible in cities as opposed to very small villages.

People need access to a range of services which allow them to engage
in economically productive activities. These services include, at a
minimum, market access, educational, health, financial, entertainment,
transportation, and communications—these enhance life and livelihood.
Affordable infrastructure makes service provision commercially viable.
However, infrastructure investment is ‘lumpy’ – the average cost of
provision of infrastructure is inversely related to the scale of the
operation.

Resource limitations preclude the provision of infrastructure at every
village. Moreover, instead of 600,000 small villages, the future
population distribution has to be in a much smaller number of much
larger habitations – if the majority of the labor has to be engaged in
non-agricultural activities. The basic geographical structure of
population distribution will eventually undergo a change because
people migrate out of villages into cities.

RISC (Rural Infrastructure and Services Commons) is an economic
model which can catalyze rural economic
development by providing rural populations a comprehensive set of
relevant services. It works within the constraints of limited
resources by focusing attention to and concentrating investments at
specific locations to obtain economies of scale, scope, and
agglomeration.

A RISC provides a reliable, standardized, competitively-priced
infrastructure platform consisting of power, broadband
telecommunications, and the physical plant (building, water,
air-conditioning, sanitation, security). This is achieved by the
coordinated and cooperative investment of firms that specialize in the
component activities.

The user services such as market making, financial intermediation,
education, health, social services, governmental services,
entertainment, logistics, etc, make use of the infrastructure
services. Market forces determine the set of services offered at any
location. The availability of the infrastructure reduces the cost of
the services and therefore the prices that the users face.

The total rural population of India can be covered by about 6,000
RISCs each servicing the needs of approximately 100,000 people. By
providing a full complement of services, RISC creates a ‘micro-city’
which seeds the formation of a city by drawing to it the population
from the surrounding areas. RISC focuses on the development of the
rural population, and not on the development of villages which are
destined to be extinct anyway.

[The RISC concept paper was jointly written by Vinod Khosla and Atanu
Dey. It is available at www.khoslaventures.com]