Credit, food and labour. Constraints on structural adjustment in rural areas of South India

Structural adjustment policies and processes hinge on trading development funding and debt relief for national policy changes aimed at curbing central controls on economic development and barriers to free trade. Researchers from the Universities of Bradford and Hyderabad probed the effect of structural adjustment processes on poor rural areas in Andhra Pradesh, South India. They found that none of the changes resulting from structural adjustment that appeared liable to affect rural areas (such as higher interest rates on rural credit, or higher food prices) had yet taken effect in the region. Even so, their report identifies ways in which different groups in rural areas might be threatened by such changes. It also suggests new steps to help protect the poorest and empower women affected by the process of reform.

The research involved a full survey of four villages in the drought-prone upland western part of Chittoor District in Andhra Pradesh. Two of the villages, one less and one more developed, were chosen for more in-depth study. Household heads of 60 randomly selected agricultural households in each village were interviewed. An additional 40 people, mostly women, were surveyed. Members of a women's group, shopkeepers, traders and bank managers in a nearby town were also interviewed. The results are reported under three main headings, viz credit markets (formal and informal), food markets, and labour markets. Findings suggest that, by 1995, structural adjustment and attendant moves towards liberalisation have had little direct or net effect in the study area. Reasons include:

• The State government has insulated rural poor households from rising food costs in 1991 through 1992.
• Liberalisation policies affect stockmarkets and central governance but have delayed impacts on rural areas.
• Cuts in farm input subsidies have not been substantial.

The researchers' assessment of current conditions found that:

• access to bank loans is still restricted by gender, illiteracy, lack of assets and remoteness from major towns ; tenants in particular are using costlier forms of informal-sector credit
• schemes that subsidise essential food supplies are extremely popular
• schemes that directly offer wages to agricultural and non-agricultural labourers can have transforming effects on local economies and communities, even in remote villages.

With an eye to potential future policy reforms, the report cautions policymakers that:

• promoting the interests of women may require involving them in the policy reform process
• banking reforms should take full account of the institutional complexity of credit institutions
• food subsidies cannot be cut without serious political complications
• more innovative research is needed to form a sound basis for new policies.

Further analysis of the data seems to show that the vested interests of the masses and the elite castes tend to obstruct the governments from reducing their fiscal deficits.

Source(s):
Preparing for Rural Adjustment. University of Bradford Development Papers 2. W.K. Olsen and U. Rani (1997)

Funded by: ESCOR (DFID, UK) 1993-1996

id21 Research Highlight: 1998-July-03

Further Information:
Wendy Kay Olsen
Development and Project Planning Centre
University of Bradford
Bradford BD7 IDP
UK

Tel: +44 (0) 1274 233965
Fax: +44 (0) 1274 235280
Contact the contributor: w.k.olsen@bradford.ac.uk

Development and Project Planning Centre, University of Bradford, UK