Why we must re-examine narrative of rural distress

Demand for work under the MGNREGA, a ‘well accepted’ sign of economic distress, continued to be above pre-pandemic levels in the larger part of 2021 and 2022  (Photo: Mint)
Demand for work under the MGNREGA, a ‘well accepted’ sign of economic distress, continued to be above pre-pandemic levels in the larger part of 2021 and 2022  (Photo: Mint)


The narrative of India’s hurting rural economy is exaggerated if examined in the light of evidence

In recent years, particularly since the pandemic began in early 2020, public discourse and even policy decisions have operated under the assumption that India’s rural economy is hurting and our economic recovery from covid has been uneven, etc. However, the rural economy is multifaceted and the narrative around it needs to broaden to be realistic and true to facts. Currently, it is a mosaic of statistics open to individual interpretation (read imagination).

Going by the last four annual releases of the Periodic Labour Force Survey (2017-18 to 2020-21, July-June), the rural labour market has been witnessing consistently rising labour participation and sliding unemployment rates. However, a rise in the share of self-employed and a decline in the share of regular wage/ salaried and casual labour paint a mixed picture. Demand for work under the Mahatma Gandhi National Rural Employment Guarantee scheme (MGNREGA), a ‘well accepted’ sign of economic distress, continued to be above pre-pandemic levels in the larger part of 2021 and 2022. This has strengthened the belief in broad-based rural distress, a belief that deserves to be re-examined, as we argue below.

For instance, the remarkable evolution of MGNREGS work from being the last resort of village-resident families to becoming more of a smart choice for household asset creation and sustainable income generation deserves more discussion. The share of “works done on individual’s land" (included in the permissible work list in 2009 and expanded since then) has increased from 16% of the total completed works in 2014-15 to 73% in 2021-22. These works include the creation of household assets such as animal sheds, farm ponds, horticulture plantations, vermicomposting pits, etc, in which the beneficiary gets both labour and material costs as per standard rates.

Empirically, these assets have been observed to have a significant positive impact on productivity and income, and a negative association with migration within a short span of 2-3 years (study by Institute of Economic Growth, 2018). For states like Uttar Pradesh and Bihar, its share has shot up from 4% and 2% respectively in 2014-15 to 89% and 71% in 2021-22. The monetary share of works on individual land in total completed works has also risen from about 12% in 2014-15 to 32% in 2021-22. It is smaller compared to the share in the count of works done, as small projects on individual land are smaller than community assets like roads, etc, but the jump is substantial. If the monetary share continuously increases over time, then an interesting question to ponder will be the MGNREGS’s transformation into a grant for asset creation. Of course, we need to ensure that it facilitates genuine asset creation.

That said, this has long-term implications for household incomes and life choices. As per National Bank for Agriculture and Rural Development’s All India Rural Financial Inclusion Survey (NAFIS) 2016-17, more than half of all rural households depend on more than one source of income and have significantly higher incomes than those depending on a single income source. The assets created through MGNREGS on individual land can therefore aid income diversification, lift households’ supplementary incomes, and infuse resilience in rural livelihoods. This could have also contributed to the drop in casual labour and rise in self-employment seen in PLFS data.

At the same time, the agriculture sector, employing close to 60% of the rural workforce, underwent robust growth despite covid, aided by favourable monsoons. This was reinforced by high terms of trade for agriculture in the pandemic period, and manifested in high domestic tractor sales. Moreover, PM-KISAN, now operational for three-and-a-half years, has benefitted close to 120 million farmer households in 2021-22, amounting to more than half of the rural population if we take an average household size of five. For non-agricultural households that are net buyers of food, the PM Garib Kalyan Anna Yojana, in its third year now, has brought much-needed succour.

Next, consider the NFHS data for 2019-21 vis-à-vis 2015-16, which shows a significant improvement on an array of indicators concerning the quality of rural lives. The proportion of rural households living with electricity rose from 83% in 2015-16 to 96% in 2019-21; those with an improved drinking water source increased from 89% to 95%; institutional births increased from 75% to 87%, women with bank accounts used by themselves increased from 49% to 77%, and the proportion of households with any member covered by a health insurance scheme has improved from 29% to more than 42%.

Most indicators concerning the health of rural women and children have improved. These outcome- oriented statistics reveal medium-run progress in rural living standards, aided by the government’s policy focus on basic amenities and efficient programme implementation, and complemented by an evolved asset-creating job guarantee scheme. Therefore, the assumption that our rural economy is hurting needs serious re-examination both in public discourse and in policy decisions-related discussions.

These are the authors’ personal views.

V. Anantha Nageswaran & Deeksha Supyaal Bisht are, respectively, the chief economic advisor to the Government of India and an Indian Economic Service officer.

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