Revitalizing Rural Growth
- The government's strategic initiatives, such as increased spending on rural infrastructure, have significantly uplifted rural standards, creating better connectivity and economic opportunities.
India's economic journey has been unique in comparison to most other countries that followed the traditional routes. Countries, in general, progress from an agricultural economy to a manufacturing-based economy and eventually to a service-oriented economy. India, on the other hand, skipped manufacturing and became a service-oriented economy. However, realizing the scope of manufacturing in furthering economic growth, the Indian government is now focusing on making India a global manufacturing hub. This change is not only to raise the manufacturing sector but also to heavily increase rural development and give employment opportunities.
The government initiatives done in the last decade have significantly uplifted the rural living standards. The spending on rural infrastructure and projects have increased from INR 3.8 trillion to an impressive INR 13.2 trillion. This has led to the all-weather road connectivity of 99% rural habitations that moved up from 58% of the FY09 period. This connectivity improves market access, mobility, and new economic prospects open up for the rural folks.
The change in rural areas is also reflected in the changing expenditure patterns. The share of food expenditure in the rural budget has declined from 60% to 46%, which reflects an increase in discretionary spending. This trend is furthered by an increasing rural workforce, with more women, which increases disposable family incomes and thereby boosts consumption and investment.
Cyclical Recoveries and Government Focus Improving Rural Prospects
Cyclical Recovery in Global Context: Global inflation has been moderate over the last decade, stabilizing agricultural incomes and, in turn, influencing rural demand in India. Recent signs of moderating global inflation are likely to support a more balanced recovery in rural markets.
MSMEs and Employment: MSMEs have gone through multiple regulatory changes and shocks, like the COVID-19 pandemic, that have hit employment. Since 51% of MSMEs are based in rural areas, their recovery is essential for employment in the countryside. Early indicators are that the negative effects are bottoming out, implying a bounce-back in employment in the countryside.
Impact of Low Wage Growth: The COVID-19 pandemic left deep scars on the balance sheets of rural households. However, rural demand is now slowly coming back to life, despite the slow wage growth that followed the pandemic.
Government Spending and Welfare Initiatives: State governments currently spend approximately Rs. 3.1 trillion annually on committed and recurring welfare schemes, accounting for 1.1% of India’s GDP. With elections approaching in various states, there is an expectation that more states will adopt similar welfare schemes, further boosting rural economies.
Budget Allocations and Rural Development: Looking ahead, the next budget is likely to focus more on rural areas. Revenue expenditure is likely to grow with a particular emphasis on rural spending.
Conclusion
India’s economic trajectory is witnessing a transformative phase with a renewed focus on manufacturing and rural development. The government's strategic initiatives, such as increased spending on rural infrastructure, have significantly uplifted rural standards, creating better connectivity and economic opportunities. Shifts in expenditure patterns and a growing rural workforce reflect a positive trend toward increased consumption and investment. With global economic conditions stabilizing and policy support bolstering MSMEs and welfare schemes, rural India is poised to emerge as a critical driver of sustainable and inclusive growth for the nation.
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Business NewsFocusRevitalizing Rural Growth
First Published:16 Jan 2025, 04:54 PM IST
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