Economy

Are we seeing a revival in the rural economy?

Read more at www.timesnownews.com


Representational picture&nbsp | &nbspPhoto Credit:&nbspPTI

Key Highlights

  • India’s agricultural exports have been at the highest since 2013-14
  • Expectations of a normal monsoon have raised hopes for a strong Kharif harvest this year
  • Rural support measures from the government and a rapid vaccination drive remain crucial for India’s growth recovery

In the year 2020-21, India saw record-high food production. India’s agricultural exports, too, have been at the highest since 2013-14. Expectations of a normal monsoon this year have given a further fillip to the farm sector. Have predictions of the second covid wave leading to a complete decimation of the rural economy been disproved, then? Will the rural sector once again pilot the economy to recovery?

With favourable numbers emerging, analysts and industry experts definitely think so. The Smart Power India (SPI)’s survey titled ‘SPI’s Survey of Mini-grid Villages May 2021’, released last month, for instance, indicates that overall economic activity in villages was less hit during the second wave given that its impact was constrained largely to the healthcare and education sectors. Rural family incomes picked up this time, thanks to concerted efforts from the Central and state governments. “For the non-agricultural cash flows, the most important thing that we saw last time is that a large part of the resilience of the rural economy, both agricultural and non-agricultural cash flows, stemmed from all-out government support which is free food, front-loading payments, etc.,” Dr. Sachchidanand Shukla, Chief Economist, Mahindra & Mahindra, observed during a panel discussion with Tamanna Inamdar, Senior Editor at ET NOW.

A second factor driving hopes for a swift rural recovery is the normal monsoon forecast for this year. With the southwest monsoon having arrived earlier this year, the rainfall recorded for June was in a cumulative surplus at 10% of the Long Period Average. “In 2021 the monsoon was very good. In fact, it has been very good over the last three years. That, combined with global factors has led to robust farm incomes in 2021. And therefore, in many areas where traditionally the procurement wasn’t very rich, wheat procurement has been exceptionally good like in Uttar Pradesh and Bihar,” pointed out Siraj Hussain, Former Agriculture Secretary. A continued healthy monsoon coverage with even spatial distribution, combined with a strong Kharif harvest, is likely to spearhead a revival in rural demand in the next quarter.

Growth in rural demand could prove to be the shot in the arm for the overall economy over the course of the year, given that consumer spending and demand have been drastically affected across the board. “Most people in rural areas did not end up spending as much as the urban poor and urban middle classes spent on hospitalizations during the second wave, due to the fact that they mainly consulted with local doctors. Therefore, I do not think that there is a great deal of impact on the very poor sections of the society,” Hussain adds. Yet, even with rising farm incomes, rural spending remains weak, as most have been choosing to save through the second covid wave.

A bounce-back in rural spending can have just the right cascading effect for stimulating demand and boosting spending. Sustained government efforts to support the rural economy and a rapid vaccination drive, therefore, are what will underpin India’s growth recovery. “I think as long as the government continues to focus on the rural economy, we think that the outlook will remain supportive, because the government spending and coordination between Centre and states is one of the most important factors behind rural recovery,” Dr. Shukla concludes.

Read more at www.timesnownews.com

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