The Internet & absent markets

The Internet & absent markets
Comment E-mail Print Share
First Published: Mon, Jan 19 2009. 01 15 AM IST

 Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Mon, Jan 19 2009. 10 29 AM IST
A survey by IMRB International and the Internet and Mobile Association of India showed last week that there are 3.3 million active Internet users in rural India. This is promising news, but it begs the question: Why aren’t there more?
Illustration: Jayachandran / Mint
To be sure, among other advantages, the Internet enables commerce in rural India. Technology can solve what in microeconomic theory is known as the “missing markets” dilemma—a situation where an efficient market can be present, but isn’t. Just as mobile telephones have allowed fishermen in Kerala to discover the best prices for their catch, the World Wide Web can go a long way in providing the information necessary for the movement of goods to and from rural India. The Web is spreading to rural India thanks to a number of e-governance initiatives, the largest among them being the National e-Governance Plan, a public-private partnership started in 2006. Under this programme, the government will spend Rs23,000 crore in five years to set up 100,000 Internet kiosks across the country, with private players such as Microsoft and IBM providing the technical knowhow. Yet, the progress so far hasn’t been inspiring. According to the survey, 15.1 million people in rural India are computer-literate, but only 3.3 million—21%—are active users who approximately avail of the Internet once a month.
Part of the problem is that such e-governance campaigns are aimed at the government more than the citizen. The computerized systems in place to help farmers access credit, for instance, minimize time for the bureaucrat, but not the farmer. If anything, computerization may even lengthen the process of getting loans: The farmer can no longer procure documents by quickly bribing the local village official since the bureaucrat in the state capital is now at the helm (and may demand a bigger bribe).
The Internet also fails to aid the poorest farmers who till their fields but don’t possess the required legal documentation. They are “squatters” who cannot avail of any kind of loan. Technology isn’t the elixir for this missing market. The answer here is property rights. Not just the landless ones, all farmers will benefit from a stronger property-rights regime that enables land transfers without major bureaucratic interference.
Greater Internet usage will demand more resources: infrastructure for cheap electricity, as well as programming in regional languages. NGOs can play a role here, too, in tailoring systems to rural demands. But before all this, India needs the political will to push reforms granting property rights. Without this missing piece, rural India will remain an incomplete jigsaw puzzle.
What can enable commerce in rural India? Tell us at views@livemint.com
Comment E-mail Print Share
First Published: Mon, Jan 19 2009. 01 15 AM IST