September , 2022
Rural India has left the pandemic behind
21:51 pm

Saptarshi Deb

The Indian economy along with the global economy have
faced three heavy challenges in the recent past – the
Covid-19 pandemic, the Russia-Ukraine war and climate
change. However, the story of India’s rural economy has been
one of resilience.
In 2020-21, agriculture was the only sector of the economy that
remained strong, growing steadily. In 2021-22, farm exports
crossed $51 billion. Along with the provision of basic food
grains, agriculture was also India's primary employer. The
Centre for Monitoring Indian Economy (CMIE) records that
between 2019 and 2022, agriculture added 11 million new jobs
while the rest of the economy shed 15 million jobs.
According to KMPG’s report titled ‘India’s rural economy:
Key to economic revival and sustainable and equitable growth’
published in December 2020, “In the last few years rural
consumption has been key to India’s growth mainly driven
by increased disposable income. With a focus on self-reliance
– ‘Atma Nirbharta,’ rural India has emerged as a significant
investment theme. Most recently, due to the pandemic, rural
India has positioned itself to lead the demand resurgence.”
The importance of the rural agricultural sector can be understood
from the fact that the sector accounts for around 14% of the
country’s economy and holds sway over 42% of the total
Rise in consumption
In the present context, any company looking to make a big
impact cannot ignore the potential of the rural Indian market.
Various researches indicate that rural markets are being driven
by the increasing purchasing power of the rural economy owing
to increased remittances from an increasing migrant population
along with increased non-agricultural income in rural India.
Secondly, farm income was also rising – owing to renewed
emphasis on governmental procuring and increased government
spending on rural areas, focusing on infrastructure development
of rural regions. Lastly, increased access to institutional credit
has pushed consumption in rural India.
There is a flipside to this as well. Though rural consumption
increased over the years, the pandemic induced lockdown posed
some serious challenges as well. Firstly, the Covid-19 induced
lockdown ensured a reverse migration back to the villages –
cutting off remittances and creating a surplus labour force in
agriculture, reducing production cost - thereby reducing income
of rural labour.
However, with the pandemic in control, policy-makers can
afford to be optimistic. Concerted governmental efforts
to increase rural consumption coupled with a favourable
monsoon can work wonders for rural consumption. Ensuring
greater penetration of the rural employment guarantee scheme
(MGNREGA) can also boost consumption.
In 2020, it was India’s long ignored rural economy and the
agricultural sector that withstood the Covid-19 induced
economic crisis. India’s efforts at putting in place the foundations
of a welfarist state for rural India through the MGNREGA
provided a source of much needed income and in doing so,
demonstrated the one truth that we often forget in our debates
on growth – a strong welfare architecture is the foundation of
a strong economy. Covid-19 also made visible the precarious
nature of the informal economy and its deep interlinkages with

BUSINESS ECONOMICS September 01-30, 2022 15

rural India. It was to rural India and to agriculture that workers
returned when India’s cities failed to provide them livelihood.
FY 2020-21 saw the Indian economy register its worst ever
contraction since independence and the first since 1979-80. The
National Statistical Office pegged the growth in real gross value
added at basic prices for 2020-21 at minus 6.2%. But the farm
sector (agriculture, forestry & fishing) grew by 3.6%.
Earlier, there were four FYs where India experienced negative
growth. 1979-80, 1972-73, 1965-66 and 1957-58. All four were
drought years, with agricultural de-growth pulling down the
growth rate into negative territory. 2020-21 has been different.
There was record economic contraction but the agricultural
sector grew significantly (3.6%). According to agricultural
researchers like Mekhala Krishnamurthy and Harish
Damodaran, this unusual development could be linked to two
factors. One, the year in question witnessed good monsoons.
Second, the Indian government took the prudent decision to
exempt agriculture from Covid-19 induced lockdowns. The
policy call taken to permit agriculture-related activities – and
more importantly, the inherent resilience and adaptability of
rural economic actors – meant that the farm sector was relatively
insulated from lockdown-imposed supply-side restrictions. This

is clear from all-India retail sales of fertilizers touching 677.02
lakh tonnes (lt) in 2020-21, a sharp jump from the 617.10 lt and
575.69 lt of the preceding two years. It is further corroborated
by official sowing data. Total crop acreage in 2020-21 was
higher compared to the previous year both during the kharif
(from 1,053.52 lakh hectares to 1,113.63 lh) as well as rabi
(from 665.59 lh to 684.59 lh) seasons.
The problems faced by Indian agriculture at that time were more
on the demand front – the lockdown meant that out-of-home
consumption reduced substantially. With the pandemic behind,
agriculture has shed its surplus labour – the migrant workforce
having mostly returned to their urban responsibilities. The lack
of demand has been restored with all restrictions withdrawn. The
agricultural sector – albeit with a good monsoon – can look to
perform exceedingly well in rural employment generation. The
government, on their part, should look to keep non-agricultural
rural segments buoyant to ensure more employment in the
rural economy. The sheer volume of the rural economy and its
employability warrant a more focused approach to this sector
– ironing out issues linked to availability of intuitional credit,
market linkage and a planned approach to increase the overall
irrigation net in India.

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