Ministries see rural sector driving economic recovery
DRAFT REVIEW Re-employment in the sector and a surplus monsoon could boost demand
NEW DELHI: In a silver lining, the country’s economic recovery is going to be rural sector-led, inputs for an interministerial draft review being prepared for the Prime Minister’s Office states, with countryside demand for goods and services rallying ahead of that in cities and towns, according to officials aware of the matter.
About ₹73,500 crore in liquid cash, or money in hand, from prices the government has paid for crops to 4.2 million farmers till June 17, re-employment in rural sectors and a surplus monsoon so far are some of the indicators cited in the draft.
Cement sales, an indicator of construction activity, the largest workforce employer after agriculture, is higher in rural areas, it says. The country’s planting of Kharif or summer crops is higher by nearly 20% than last year’s levels for this time of the year, the inputs say, adding this has helped raise sales of fertilizer, pesticides, seeds, fuel and hiring of labour.
The government also plans to directly coordinate with local authorities in 116 districts estimated to have witnessed the largest reverse migration of workers from cities for job creation in rural industries, the draft says.
“Demand from rural India will naturally feed into the manufacturing sector. This will help in meeting the challenges. The government will have to sustain rural momentum. This is the nature of feedback,” an official said, requesting anonymity.
The finance ministry’s economic advisors are hopeful of a so-called “V-shaped” recovery by next fiscal, the official cited above said, adding that policies would be constantly “calibrated as warranted”. Economists commonly express economic downturns and recovery in charts that show shapes, such as U, V, and W. The shape V, which shows a fall followed by a sharp rise, represents a quicker recovery.
To be sure, analysts continue to make grimmer projections of overall growth. Eight of the most industrialised states, accounting for half of the India’s gross domestic product (GDP), will see the largest declines in people’s incomes this fiscal, chief economic advisor of the State Bank of India Soumya Kanti Ghosh said in a note on Wednesday.
Fitch Ratings forecasts growth in GDP, the widest measure of incomes, to shrink 5% in the current year through March 2021.
The government is counting heavily on rural spending, including its own expenditure, the draft suggests. “The Food Corporation of India (FCI) has finished record procurement (government’s buying of farm produce) of wheat, rice and pulses. It was the highest ever,” a second official said. “The direct in-account payments of ₹73,500 core completed by the FCI till June 17 is also highest ever and this money is available to spend.”
The procurement operations were delayed due to the first phase of the Covid-19 lockdown and started a fortnight late on April 15. The government was able to buy wheat harvests of 38.2 million tonnes by June 16, a record, the review states.
The draft cites data from the Centre for Monitoring Indian Economy, which showed the continuing fall in the rural unemployment rate to 7.26% in the week that ended on June 21. This job loss rate has now dropped to the lowest level in three months.
Union finance minister Nirmala Sitharaman in May announced Rs 40,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme. This took up the total allocation, along with Rs 61,000 crore announced in the Budget, to the scheme to Rs 1.01 lakh crore, the highest ever.
The inputs, in the form of a presentation, are part of the government’s routine monitoring of economic activity, the official cited in the first instance said.
K Mani, an economist with the Tamil Nadu Agriculture University, said the rural economy alone cannot do the “heavy lifting” of the economy. The GDP per worker in agriculture is just a third of the overall GDP per worker, which means expansion of higher productivity sectors such as manufacturing remains critical, he said.