Home Spotlight Will rural India help the economic revival?

Will rural India help the economic revival?

Urbanisation is the in thing today and India too is not an exception to this trend though the rate (of urbanisation) is much slower here as compared to that in China. Today, in India nearly one third of the population lives in urban areas and this ratio is increasing day by day. According to economists and urban planners, half of India’s population will be living in urban areas by 2030.

According to economists, urbanisation is needed as the urban areas are the growth centres with nearly two third of the GDP is being generated in the urban areas. Having said that it doesn’t mean that rural India has no role to play in our race to become the third largest economy in the world. Rural India will do much more than just remaining in the back seat. A case in point is the role played by rural India in reviving the lockdown hit India last year.

Multiple reasons for rural dominance

Better farmer sentiment due to a good monsoon, robust Kharif sowing, better rural cash flows owing to record crop output and crop prices, good Rabi harvest and excellent availability of retail finance and ever-increasing minimum support price for agricultural commodities (as part of an effort to double farm income) – all had shown their real impact last year when agriculture registered positive growth while the rest of the economy was decelerating due to lockdown impact.

Building material industry recognised rural potential

Though the signs of rural India’s increasing dominance was visible in last few years (especially after demonetisation) it became evident during lockdown when the whole country turned towards rural India, including smaller towns for demand generation. Perhaps building materials industry was the first one to realise it as the sector was at the forefront of the revival on the back strong rural demand. Impact on building material demand was more evident as the industry had started taking cognizance of its potential much earlier and had started expanding its dealer network to rural India. Right from cement manufacturers to paint, wood panel and pipes manufacturers looked at rural India for their survival in the immediate aftermath of lockdown.

Govt programmes helped rural India

No doubt, the front-loading of rural expenditure by the present government, with impetus on job creation and wages, touched a record high under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) during lockdown and its immediate aftermath when migrant workers went back to their native villages seeking job and safety. Schemes like PM-Kisan Yojana, which was launched to provide income support by way of direct cash transfers to all landholding farmers, has enhanced rural purchasing power. Incremental agricultural GDP is estimated to increase by over Rs 3.4 lakh crore in FY21 and by over Rs 3.3 lakh crore in FY20, compared to an increase of only Rs 1.3 lakh crore in FY19.

The agriculture and allied sectors were the sole bright spot amid the slide in performance of other sectors, clocking a growth rate of 3.4 per cent at constant prices during 2020-21. Indian Meteorological Division has predicted normal Monsoon this year too which is a good news and may help to rural population to maintain their income level, if not improve upon it.

But year 2021 is not like 2020

However, second wave, unlike the first wave, is severe not only in intensity but also in its coverage and has not spared rural India too. The reverse migration of workers, though not of the magnitude seen last year, is further aggravating the situation and may be one of the reasons for pandemic spread in rural areas this time. Spread of pandemic in rural India will impact the population in two ways. First, the people have to spend more on healthcare leaving little to spend for other purposes thus curtailing their purchasing power. Secondly, people in the villages have to spend more time in treating the illness and that too when the agriculture season about to commence which may impact the final output.

Though vaccination drive currently on may provide reprieve to the rural population, presently it’s concentrated in urban areas with rural areas mostly neglected. It may take few more months for the vaccination drive to reach rural India and this delay may prove very costly for the economy as a whole.

However, the third consecutive normal Monsoon is a good news at this juncture to keep the spirit up and also to help the rural economy to maintain its income level. Also, the urban India this time is not completely shut with industrial production still being carried out which means demand generation might slow down but may not come to a grinding halt as had happened last year. That may be a great relief for the country which is currently gasping for oxygen.

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