This hope stems from the rising strength of India’s rural economy. The often considered weakness of Indian economy because of poor agri-economics, marked by a very high degree of seasonality, has become the economy’s inherent strength during these Covid times.
Agriculture accounts for more than one third of rural income and it is still the most fundamental aspect of the rural economy even through the dependence on agriculture has reduced over the years. Sowing activities have progressed very well for the kharif season with an all India increase of 6 per cent over the last year’s. The solid growth in sowing area and an excellent monsoon season means that the upcoming rabi season will also be a bumper one. This on a record output of 2019-20 agriculture season means the agri-economy will continue to grow stronger.
Moreover, the government has been supportive to rural economy because of the migrant labour crisis, which means the flow of money into the Indian rural economy has been stronger than ever.
All this bode well for the 65 per cent of India’s population that lives in rural India. The remaining 35 per cent of India’s population is urban and the challenges to the urban economy are significantly higher. However, even among the urban populace, a significant portion of people have rural connect, which has become an advantage in these challenging times.
While the near-term prospects appear good for the rural economy because of good agriculture produce, even the medium-term prospects are brightening. The government is taking measures to address the supply chain inefficiencies. Modifying the APMC Act and allowing farmers to sell their produce as per the market conditions rather than governed by the regulated mechanism will have long-term consequences, as investment in food supply chains will increase and make pricing more predictable and investment in agriculture a less risky proposition.
While all these measures will take time to yield results, the government push is significant for building up the necessary infrastructure.
The rural play at this juncture seems to be one of the most assured one to bet on in this environment. While the broader factors appear healthy, they are also backed by high frequency indicators. Tractor sales continue to soar. Even September sales have been very strong as the monsoon season comes to an end.
Automobile sales are picking up and there is a hurry to own personal transportation. The choice for preferred colour of vehicle is reducing and inventory levels at rural outlets seem to be lean.
The great Indian FMCG companies, which have depended on the rural growth engines, are also seeing decent traction, as inventory levels have become leaner and demand scenario is picking up. The demand for agrochemicals continues to rise with the growth in per capita consumption. Also, interestingly, the southern rural economy is picking up quite well with states like Andhra Pradesh, Telangana, Tamil Nadu and Karnataka reporting a solid sowing season.
This bodes well for the overall economy as contribution of these states tends to be higher.
Even as challenges to non-agricultural activity persists and localised lockdowns have posed significant challenges, the mortality rate in rural India due to Covid-19 has been lower than urban parts. Also, because of better social distancing abilities, the challenges are likely to be mitigated better.
At this juncture, the rural economy is the workhorse of the Indian economy, as many aspects of the urban economy have come to a standstill and will take time to revive. In the meantime, the old adage of Jai Jawan! Jai Kisan! seems to be finding more relevance in these testing times.