Why rural resurgence matters
With rural demand driving growth in many Indian industries, interventions aimed at jump-starting agrarian activities will play a key role in the country’s economic revival
The government’s decision to enact a nationwide lockdown (from March 25) to tackle the Covid-19 pandemic ignited a debate on the trade-offs between saving lives and protecting livelihoods. The pandemic has jeopardised economic activity, and has disproportionately affected the employment and income of daily wage earners in urban centres (mostly rural out-migrants) and rural farmers. The growing inter-connectedness between India’s urban and rural economies has meant that the headwinds and tailwinds impacting the former have had a congruent impact on the latter as well. The latest figures on rural and urban unemployment are instructive.
As per the Centre for Monitoring the Indian Economy, in the third week of April, urban and rural unemployment rose to 25.1 per cent and 26.7 per cent, respectively. On the one hand, the lockdown forced a large proportion of the nearly 40 million internal migrants to attempt a move back to rural areas. On the other, muted farm activity and the breakdown of rural-urban distribution channels appear to have resulted in the inability of farms to absorb the seasonal migrants, even in the peak harvest season, leading to a jump in rural unemployment and distress.
While the impact of the pandemic on India's rural economy does currently portend a grim scenario, one cannot but underscore that any credible economic revival strategy will hinge critically on the resurgence of the rural economy itself. Why so?
First, in terms of both numbers infected and fatalities, rural India has been fairly unaffected until now. Compared to urban areas, factors such as low population density and more spatially dispersed settings for shelter and economic activity have promoted physical distancing, thereby preventing the spread of the virus in the rural hinterlands. Thus, at a time when risk-assessment to public health and safety continue to hinder activities in the urban economy, with reasonable precautions, full-fledged economic activities can be instantly kick-started in rural areas. Being central to the lives of around 68 per cent of the rural population, restarting agrarian and allied activities will not only protect rural livelihoods, but will also be critical in ensuring food security for the entire population, particularly at a time when global supply chains are disrupted and may remain so.
Second, over the last few years rural markets have kept pace with urban markets, as data from the bellwether fast-moving consumer goods and auto industries suggest. In the recently announced stimulus packages to tackle the pandemic, the government has rightly focused on supplementing budgetary allocations and disbursements under the Pradhan Mantri Kisan Samman Nidhi, Pradhan Mantri Krishi Sinchayee Yojana and Pradhan Mantri Annadata Aay Sanrakshan Abhiyan, among other schemes. Such steps are likely to compensate for income losses due to the lockdown, and help sustain rural demand. From a revival strategy perspective, such interventions are crucial, as rural households account for 54 per cent and 57 per cent of India’s household income and household consumption expenditure, respectively.
Third, in the lockdown period, the government has accelerated disbursement of Pradhan Mantri Fasal Bima Yojana claims to offset any losses to the farmer. Similarly, under the Kisan Credit Card saturation drive, 18.26 lakh applications have been sanctioned for loans totalling ~17,800 crore. Such supply-side interventions are likely to reduce farm distress, help avoid debt-traps, and prevent rural dissaving. Coupled with this, earnings from the rabi produce should strengthen rural incomes and savings, induce future consumption, and spur economic activity in general.
Thus, while some conditions will naturally work in favour of the rural economy to steer the revival process, well-directed public policy interventions in rural India can strengthen the overall economy as it emerges in a substantially different post-covid paradigm. The focus needs to be on improving the dynamics, resilience, and agility of the rural economy to adapt to exigencies such as what we face now. Some of them merit our immediate attention.
First, just as the Pradhan Mantri Gram Sadak Yojana has been the centrepiece of infrastructure development in rural India — redefining market and livelihood access; improving on-farm and off-farm employment opportunities; and deepening access to formal finance systems — policy interventions must now extensively focus on the rural health and education segments. Public-private partnership models, with viability-gap funding to make them profitable, need to be worked out in delivering technology-aided, affordable health care and education to the rural populace. These can bear positive externalities by improving factor productivity; arrest the exodus of human capital; and boost rural incomes and consumption by creating opportunities for respectable livelihoods in rural areas themselves.
Second, in the post-covid world, India will possibly witness de-centralisation of supply chains. Firms are expected to go closer to the source by creating satellite supply chain hubs in smaller towns, in order to keep stocks fresh and reduce transportation overheads, enabling competitive pricing, and providing better returns to the farmers. In this direction, the Private Entrepreneurs Guarantee Scheme can be extended to augment cold storage capacity and introduce “food hubs” to meet the demand of India’s burgeoning population.the government must find space for development of such “local food systems” under the Pradhan Mantri Gramin Kisan Sampada Yojana to strengthen India’s food security, in light of the emerging uncertainty in the global geo-economic and geo-political environment.
Third, as the axis of development increasingly shifts towards “rurban” locations, vocational training will need a policy push, to train rural youth in digital technologies and communication tools, and impart in-depth knowhow of innovative products and service delivery models relevant in the post-covid era. Indeed, major firms are looking at a “contactless” way of doing transactions in the future. More investments in rural skilling and innovation, consistent with emerging business models that cater to expected shifts in consumer behaviour, will go a long way to kindle the entrepreneurial spirit of rural India.
To come out stronger from the current crisis, it is time we accord adequate focus on rural resurgence, and widen the scope of public policy interventions in order to strengthen India’s response to the postCovid paradigm.
Public-private partnership models can be used to boost rural incomes by creating opportunities for respectable livelihoods in rural areas themselves