Go Rural - The New Mantra

GO RURAL: THE NEW MANTRA

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As per the latest estimates of the Central Statistical Organisation (CSO), the growth rate of the Indian economy during 2008-09 is expected to be around 7.1 per cent, as against the earlier expectations of 8 per cent. Not only this, it has now been estimated that India’s growth rate during the financial year ending March 2010 would moderate further to 5.5 per cent, which would be lowest during the past several years.

As direct fallout of the ongoing global recession, rapidly increasing unemployment rate has been a major cause of concern. In USA, the unemployment rate has gone up to 8.7 per cent and the same in Japan has also been the highest in the recent times. China has reported 20 million job losses. In India this figure is officially estimated to be about 5 lakh during the quarter ending December 2008. Loss of jobs in the unorganized sector due to reduced economic activity is going to be much higher and beyond estimation.

International Labour Organisation (ILO) maintains that the employment rate in India and other South Asian nations may by lower than the world average, due to their lesser exposure to the American economy and the financial markets. Further, relatively larger rural base in India is a positive and strong factor in combating the ill effects of global recession. It is perhaps for the first time after the onset of the process of reforms that the Indian government has realized the importance of the rural economy to tide over the difficult economic situation.

Rural Orientation

Indian economy is peculiar to the extent that it has a lot more rural orientation than most economies of the world. Majority of the countries in the world are dependent on their industrial centres and rapidly growing cities for maintaining their growth rate. In India, though industries and the services sectors are centred around the industrial and urban areas, yet over 60 per cent of the work force is directly or indirectly dependent on the primary sector. This sector contributes about one fourth of the total GDP and offers tremendous potential for growth in the near future. Being a low income segment, this also does not get influenced easily by extraordinary economic situations.

As per the views of the Rural Marketing Association of India, there has been no impact of economic slowdown on the rural economy of India. A nation-wide study carried out in the rural markets of the country found out that the rural markets in the country actually offer an opportunity to the marketers to come out of current economic crisis.

Main reasons for such immunity are stated to be higher percentage of total expenditure on food items and the fact that majority of the population is involved in self-employment occupations, having no fear of loss of jobs. The telecom sector has witnessed a rapid growth in the villages and small towns. The total telecom subscriber base for India grew from 70.83 million in the first quarter of 2008 to 90.98 million in the second quarter. Out of this growth 71 per cent rise in this sector came from the rural India, while the urban areas accounted for the remaining 29 per cent growth.

The study also brings out that more than 72 million Kisan Credit Cards are in use in the rural areas of the country, which number almost matches the number of Credit Cards under use in the urban areas. During 2008, larger part of growth of Fast Moving Consumer Goods (FMCG) came from rural and sub-urban markets.

Majority of the people in the rural areas do not invest in stock markets and park their savings in low risk portfolios like post office/bank savings or fixed deposits. The government of India was quick to realize this and immediately after the recession began to show its impact began to direct its economic policies towards the rural sector. Fortunately for the country, at the critical juncture when the great recession knocked at the doors of Indian economy, several government sponsored programmes involving huge public expenditure in the rural areas were already being implemented.

The Interim Budget for the year 2009-10, presented by Mr Pranab Mukherjee on February 16, 2009, also had its focus on the rural economy. Under the NREGS during the year 2008-09, about 3.51 crore rural households were benefited, generating 138.76 crore mandays. For the year 2009-10, a massive allocation of Rs 30,100 crore has been made for the said scheme. In other words, this huge sum would be distributed as wages to the rural households during the said year.

Another gigantic rural development programme is Bharat Nirman, which aims at huge public expenditure in the rural infrastructure. It has six components, including rural roads, rural telecommunication, irrigation, drinking water supply, rural housing and rural electrification. As per the Finance Minister, the allocation to this programme was increased by 261 per cent during the period between 2005-09. A provision of Rs 40,900 crore has been kept in the interim budget, 2009 for this programme.

In addition to stiff doses of funds proposed through the above two flagship programmes, the Finance Minister also made significant allocations to various other programmes and schemes having rural focus. A sum of Rs 13,100 crore has been allocated for Sarv Siksha Abhiyan, most of which is to be spent in the rural areas. Mid-day meal programme, which is also termed as the largest school feeding programme of the world, has been allocated a sum of Rs 8,000 crore. To further supplement the efforts of nutrition to the rural students, another provision of Rs 6,705 crore has been made under the Integrated Child Development Scheme (ICDS), under which the pre-school children and the lactating mothers are provided nutrition and healthcare under Anganwaris.

Another important scheme with rural focus is Rajiv Gandhi Rural Drinking Water Mission, which aims at providing drinking water supply to the villages not covered by tap water supply. A sum of Rs 7,400 crore has been provided for this scheme for the financial year 2009-10. Rural sanitation is also an ongoing programme for which Rs 1,200 crore provision has been kept. NRHM, which is a healthcare programme for the rural areas, has been provided with a hefty provision of Rs 12,070 crore.

It is apparent from the above that the direction of the Interim Budget 2009-10 has been towards the rural areas.

Whether it is the growth of FMCG or consumer durables, or the telecommunication growth, rural areas of the country hold the key for future development. Enormous amounts of funds being pumped into the rural economy by the government would greatly supplement the natural growth of these areas. The trickledown effect, though delayed, has begun to actually show. If the trend continues, the so-called ‘digital divide’ may start experiencing imminent and rapid bridging.

Rural markets in the country have arrived in a big way. The hereto ignored rural areas have now revealed their true potential. The policy makers have realized that as soon as the cities and the industrial centres start becoming saturated with growth potential, it is the rural market of the country which holds the key for future. Even at the pre-sent times of crisis, it is the rural economy and its hidden capabilities that may ultimately bail the economy out. It is for sure that the rural emphasis in the India’s economic policy is going to stay for quite some time in future.

The rural areas had remained, by and large, neglected after independence. But now, with improved focus on rural wage employment, rural infrastructure, rural healthcare, telecommunications, irrigation, rural housing, drinking water supply, nutrition and rural electrification in a big way by the government, the purchasing power of the people in these areas is on the rise and, if the current trends continue, the day is not far when the history of rapid growth of the economy for the next two decades would be scripted by the smart growth of rural economy in the country.