Rural India to lead the way


The future of India lies in villages”-Mahatma Gandhi

The statement is even more relevant now as the Indian economy is grappling with an unprecedented crisis. It looks like the rural economy should lead the way in India’s path to economic recovery. The reverse migration to the villages makes it even more important.

Agriculture sector is the major source for rural employment. For instance, if we take the Indian economy as whole, more than 50 percent of the total workforce is employed in the agricultural sector. In FY20, when other sectors registered a declining trend, agricultural sector registered an improvement in its growth rate at 4 percent YoY.

And, even in these difficult days of covid-19, some green shoots are visible in the rural economy. As per the CMIE, rural unemployment rate has fallen back to 10.5 percent in June’20 from the peak of 22 percent in April and May. Similarly, good rabi harvest and forecast of a normal monsoon has lifted the spirits in the rural economy aiding the demand for automobile and FMCG products. Tractor sales, an indicator on the health of the rural economy, registered an impressive growth rate in June’20. For instance, Escorts Ltd witnessed 21 percent YoY growth rate in its tractor sales in June’20.

 Though rising food inflation rate won’t be good news for the consumers, it could also indicate that the farmers are getting better prices for their products. In the last few months, food inflation rate is at elevated levels, though it could be also attributed to the supply disruptions due to the national lockdown. Better prices for the farm products would result in better rural income, and higher consumption. Earlier, when IMF downgraded India’s growth rate for FY20, it cited weak rural income growth as one of the reasons for the country’s growth slowdown. Consumption being the backbone of the Indian economy, boosting rural income and consumption can have an overall positive effect on the Indian economy.

The government has announced some of the long pending reforms for the agricultural sector. The amendment of the Essential Commodities act, and removal of barriers for the farmers to sell their produce could turn out to be a game changer. Additionally, increase in the allocation for MGNREGA by Rs 40,000 cr, making it a total of Rs 1 lakh cr for FY21, would support the rural economy. The revival of agricultural sector and regaining health of the rural economy is important as it have spill over effect on other sectors.


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