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RUEHBI/AMCONSUL MUMBAI 3566

UNCLAS SECTION 01 OF 03 NEW DELHI 000694 
 
STATE FOR SCA/INS JASHWORTH AND SCA/RA MURENA 
USDOC FOR 4530/ITA/MAC/OSA/LDROKER/ASTERN 
DEPT PASS TO USTR FOR SOUTH ASIA - CLILIENFELD/AADLER 
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA - MNUGENT 
TREASURY PASS TO FRB SAN FRANCISCO/TERESA CURRAN 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD EAGR PREL PGOV PTER IN
SUBJECT: BHARAT BALLOT 09: THE INDIAN RURAL VOTER 
 
REF: NEW DELHI 572 
 
NEW DELHI 00000694  001.2 OF 003 
 
 
¶1.  (SBU) Summary: It is conventional wisdom in India that the rural 
voter is more important than the urban voter, mainly because there 
are more than twice as many rural as urban residents in India and 
polling in recent years has indicated that rural voters are more 
likely to vote than urban voters.  However, too often rural is 
conflated with farmer, and with poor, subsistent, or illiterate. 
Yet, half of rural GDP is non-agricultural, and half of India's 
middle-income households come from the countryside.  As India - and 
its political parties - prepare for national elections, Post 
considers the many dimensions to the rural voter and questions the 
capacity to effectively target such a voter, given the wide 
variability in rural experience.  End summary. 
 
Most of India Lives Outside the Cities 
-------------------------------------- 
 
¶2.  (U) India is still predominantly rural, with 71% of Indians 
living in rural areas, compared to a world average of 50.6%.  In 
comparison, the UN reports that 63% of Africa's population is rural, 
58% of China is rural, and 22% of Latin America is rural.  Even 
tiny, mountainous Bhutan is more urbanized, in percentage terms, 
than India.  With 828 million rural habitants, India also has the 
largest rural population in the world, according to the UN, 
accounting for one-fourth of the world total. 
 
¶3.  (U) India's population - and population growth - is concentrated 
in the northern Hindi-speaking belt of states.  Indian government 
data shows that roughly half of India's population in 2006 was found 
in just five states: Bihar, Uttar Pradesh, Rajasthan, Orissa and 
Madhya Pradesh. Historically, these are among the poorest states, 
although several have been showing improved growth rates in recent 
years, especially Rajasthan.  In these five states, rural rates are 
even higher than the India average.  For example, in Uttar Pradesh, 
80% of residents are in rural areas, while 90% of Bihar is rural. 
 
Irrigation, Crop Subsidies 
Affect Regions Differently 
--------------------------- 
 
¶4.  (U) Most of India's states receive their annual rainfall during 
the summer monsoon (June-September), which has historically been 
below average once every four or five years, wreaking havoc on the 
incomes of a large number of Indian farmers, since only 40% of sown 
land is irrigated.  Like many things in India, irrigation is 
concentrated - mainly in the northern grain basket states of Punjab, 
Haryana (which were also major Green Revolution implementers in the 
1960s) and Uttar Pradesh.  Because of irrigation and climactic 
conditions, farmers in Punjab and Haryana are able to grow two crops 
(mainly wheat and rice) a year, making them among the richest 
farmers in India.    Most farmers of oilseeds, pulses and coarse 
cereals production, confined mostly to Western and Central India, do 
not have irrigated land. 
 
¶5.  (U) The central government provides a price guarantee, called a 
minimum support price or "MSP" to certain crops, mainly grains, 
coarse cereals, pulses, cotton, and sugarcane.  Under the UPA 
government, these have increased significantly - in the case of 
wheat, the MSP has risen by two-thirds from Rs 640/quintal in 
marketing year 2005/06 to Rs 1080/quintal in 2009-2010.  However, 
fruit and vegetable farmers  - who sown 70% as much land as the 
prototypical wheat farmer - receive no MSP. 
 
Government Program Beneficiaries 
------------------------------- 
 
¶6.  (U) Across India, a substantial portion of rural residents do 
not own any land and thus are not directly benefited by higher MSPs 
or monsoon-affected yields, although many derive their income  as 
agricultural laborers and thus benefit from more work during good 
harvest years.  According to the latest government household survey 
data and NCAER data, collected in 2004-05, two-fifths of rural India 
is landless.  As such, they have not directly benefited from the 
United Progressive Alliance (UPA)'s recent farm debt waiver program, 
 
NEW DELHI 00000694  002.2 OF 003 
 
 
higher MSPs, irrigation schemes or fertilizer subsidies.  Landless 
workers are, however, key beneficiaries of the UPA's National Rural 
Employment Guarantee program, which promises 100 days of 
minimum-wage work to every rural household (reftel). 
 
¶7.  (U) Marginal farm holdings (with less than one acre) constitute 
nearly one-third of India's rural population, and although they and 
small farmers with two to five acres of land (144% of rural 
households) were the targets of the farm debt waiver program, it has 
been noted that much of their debt may be ineligible since they have 
borrowed money from informal money lenders for weddings or medical 
costs, rather than with formal banks for farm inputs. 
 
Rural Non-Farm Income 
--------------------- 
 
¶8.  (U) Many government programs have equated rural India with 
farming, and thus missed that an increasing share of rural GDP is 
coming from non-farm activity.  This is because 70% of rural Indians 
own little or no land; turning instead to livestock (one-fourth of 
agricultural output) and/or non-agricultural employment in the 
countryside.  Using both government and its own data, local think 
tank National Council for Applied Economic Research (NCAER) 
estimates that non-farm income from industry and services in the 
rural economy has been growing steadily over the decades and this 
fiscal year (April 2008 to March 2009), it exceeds agricultural 
income in rural GDP for the first time.  NCAER has estimated that in 
2008-09, rural GDP will consist of 41.6% agriculture, 30.2% 
industry, and 28.2% services.  By contrast, in 1993-94, 58% of rural 
GDP came from agriculture, and in 1999-2000, 51.4% came from 
agriculture. 
 
¶9.  (U) This research links with other, joint analysis conducted by 
NCAER and Future Capital Research, indicating linkages between 
rising urban demand growth and GDP output in the rural areas.  Their 
study, "Is Indian Urban Growth Good for Rural India?" estimates that 
a 100-rupee rise in urban consumption generates a 39-rupee rise in 
rural incomes, as economic activity there grows to serve India's 
urban markets.  They further find a 10% increase in urban 
expenditures leads to a 5% increase in rural non-farm employment. 
All told, the rural economy accounts for more than 40% of all 
manufacturing in the country.  These economic linkages mean that 
rural India benefits enormously from improvements and expansion of 
the road and electricity networks.  The urban-rural ties also 
explain the rapid growth in rural sales of cellular phones - 
recently comprising 60% of all-India sales - they tie rural 
businesses to their markets in nearby towns and cities.  The 
research also indicates that rural incomes are growing at a faster 
rate than urban incomes, contradicting the view that rural India is 
getting further behind cities. Indeed, there are almost as many 
middle-income households in rural India as there are in urban India 
- 27 million to 29 million. 
 
Comment 
------- 
 
¶10.  (SBU) After being stuck in a centuries-old farming economy, 
much of rural India - per force - is diversifying into other sources 
of income, either independent of farming or to supplement volatile 
and often meager agricultural incomes.  The increasing percentage of 
agricultural income coming from livestock reflects that more Indians 
can afford milk and eggs.  Improved and expanded road and mobile 
phone networks now permit more workers in rural India to produce 
goods and services for nearby towns and cities.  While millions in 
India's countryside will still need to move to towns and cities to 
more evenly distribute labor and land resources, India's 
diversifying rural economy is helping tens of millions of landless 
or marginal farmers improve their livelihoods and escape poverty. 
 
¶11.  (SBU) What these large swaths of voters want are continued 
improvement in infrastructure and education (which will be 
considered septel), not handouts based on a one-dimensional - and 
increasingly mythical - farmer.  A villager in Rajasthan may value 
marketing programs to expand sales of handicrafts or extension 
services to improve their livestock health and productivity, while 
 
NEW DELHI 00000694  003.2 OF 003 
 
 
someone in rural Bihar needs flood control and a farmer in Punjab 
needs more warehouses to store overflowing grain harvests.  The UPA 
- or any ruling government - could better target its programs and 
electoral strategies if it realizes that the old notion of the 
"common man" as the subsistence farmer is increasingly a thing of 
the past. 
 
BURLEIGH