Home / Opinion / Columns /  A rural recovery is critical to the overall revival of India’s economy

The second wave of the pandemic seems to be finally receding. The official number of infections has plateaued, though deaths continue to rise and it may be some time before they turn a corner. Declining covid infections are good news. But it will be premature to declare the end of the second wave based on official figures. Independent media reports show these tallies to be gross underestimates of the ground reality, and more so in rural areas. This is difficult to verify. The general consensus, however, is that the actual levels of infections and deaths are much higher than officially reported.

Doubts over the official numbers apart, what’s also worrying is the geographical spread of the infection. The pandemic this time has affected rural areas disproportionately more. Within rural areas, the spread is far worse in states and districts with higher concentrations of the poor and lower access to health infrastructure. Rural areas, therefore, hold the key to dealing with the pandemic. Given the poor state of health infrastructure in a majority of the districts that are contributing a bulk of the cases, the challenge is not just to deal with infections, but also ensure a reduction in their numbers. Improving rickety health infrastructure in a short span of time may be difficult. The best strategy, therefore, would be to increase the rate of vaccinations in such districts. Unfortunately, data suggests that the reverse is happening, with the rate of vaccination much higher in urban metropolitan areas than in rural.

The country’s health crisis is a bigger challenge in rural areas at this point. It may yet worsen for some time before cases begin to decline. The real test, however, will begin once the rise in infections is brought under control and the rural economy has to be rebuilt. It has already been under stress for some time now. Recent new data isn’t available, but two high-frequency indicators of income and employment suggest a worsening of rural distress. Numbers from the labour bureau suggest that real wages for March 2021 were lower than in March 2019 for both agricultural and non-agricultural workers. On the other hand, data from the Centre for Monitoring Indian Economy (CMIE) shows that the rural unemployment rate increased sharply from less than 6% in the first week of March to more than 14% in the most recent week. Joblessness has increased faster in rural areas than in urban zones. At the same time, private surveys also confirm that most households have failed to recover the income lost during last year’s first wave of covid, despite an economic recovery.

What’s also worrying is that, unlike last year, India’s agricultural sector is showing signs of a sudden spike in stress. Recent data indicates a rise in input costs and decline in credit availability in rural areas. Some of this is already visible in the slowdown in sales of agricultural machinery and decline in fertilizer consumption. The fall in demand is also reflected in a decline in prices of most agricultural commodities, except those that are imported, such as pulses and edible oil. Further, a fall in prices of vegetables and cereals will likely hurt agricultural incomes, thus making a rural recovery distant.

However, unlike 2020, when the government had announced three large packages to help revive the informal sector and increased social-sector expenditure, this time there has not been any such fiscal package, except for support in the form of free foodgrain to be distributed through the public distribution system (PDS) for two months. Despite a massive increase in demand for work under the rural employment guarantee scheme, the budget for it has not yet been enhanced. There has also not been any announcement on income transfers to vulnerable groups.

There is a glaring lack of fiscal support from the government at a time when India’s rural economy has been in deep distress for at least a year. High out-of-pocket health expenses and the loss of jobs and incomes are building up towards an even larger humanitarian crisis. This is likely to impede India’s demand recovery. Unlike last year, when a revival was driven partly by a rebound in discretionary spending in rural areas, this time it will be difficult even for essential spending to be maintained in the absence of state support.

Containing the pandemic is the immediate goal for India’s central and state governments. But ignoring other fast-worsening conditions in the rural hinterland will aggravate pain. Any delay in increasing public outlays on rural areas will, therefore, weigh not just on the rural economy, but also on chances of a broad economic revival.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi

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