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Thank You Prime Minister: Rural India Doing Well

Despite a continuing fall in the growth rate of India’s GDP for the last several quarters there are indicators that point to a turn-around of the rural economy. Positive and long-term improvements can be seen in foodgrains production, in horticulture, dairy, poultry and fisheries, access to physical infrastructure such as electricity and roads, per-capita income of poorer states (which have a high percentage of rural population), wages of unskilled labour and growing employment in non-farm occupations due to programmes such as MUDRA

“For all the work that has happened at the grassroots during the last three years that has shown positive results, the real credit goes to our Prime Minister Narendra Modi. Because, when the leadership has vision and is committed, the rest falls in place,” said Narendra Singh Tomar, Union Minister of Rural Development, Panchayati Raj and Mines. He was speaking at 49th Skoch Summit wherein he was conferred the ‘Governance Person of the Year Award’ for his contributions in rural development including MGNREGS, PMGSY, Rural Housing, IT enablement of DBT and transforming rural areas into sustainable spaces.

According to a paper published in INCLUSION authored by N C Saxena, Distinguished Fellow, SKOCH Development Foundation, “Thanks to good monsoon, India had a record foodgrain production of 273 million tonnes (MT) in 2016-17, which was a good 17 million tonnes more than the annual average of the previous three years. The long-term trend in foodgrain production after 2003-04 has also been encouraging. Foodgrain production in 1990-91 was 176 MT, which increased by less than 11 per cent to 195 MT in 2003-04 but jumped in the next 13 years by 40 per cent to 273 MT in 2016-17.”

However, growth in some other crops, such as oilseeds, sugarcane, cotton and potato in the last six years has not been encouraging. This has slowed down the overall growth of crop production in India. In the recent past, growth rate of agriculture has been fluctuating at 1.5 per cent in 2012-13, 5.6 per cent in 2013-14, (-) 0.2 per cent in 2014-15, 0.7 per cent in 2015-16 and 4.9 per cent in 2016-17, said Saxena.

As observed by the recent Economic Survey, the uncertainties in growth of crop agriculture are explained by the fact that shocks emanate mainly from deficiency in rainfall since 55 per cent of agriculture in India is rainfall dependent and there have been two consecutive years of less than normal rainfall in 2014-15 and 2015-16.

As opposed to crop agriculture, India has seen far better progress in non-crop agriculture, i.e., in horticulture, dairy, poultry and fisheries. Whereas foodgrain production rose by 40 per cent between 2003-04 and 2016-17, production of horticulture crops almost doubled during the same period from 153 to 287 MT. The vegetable and fruit segments of the horticulture sector can be key drivers of agricultural growth and can be further developed by appropriate investments in harvesting, low cost storage facilities and processing technologies along with development of marketing infrastructure. These challenges are discussed later.

India continues to be the largest producer of milk in the world. During the years 2014-15 and 2015-16 the milk production registered an annual growth rate of 6.27 per cent. Poultry and fisheries have also recorded an annual growth rate of more than 5 per cent since 2010-11. Production of milk and fish is now almost three times what it used to be in 1990-91, whereas egg production has shown even better progress. 

Wages & Employment

Higher agricultural growth, especially in foodgrains and non-crop agriculture and greater opportunities for wage labour in the non-farm sector, such as construction, has increased the demand for labour and led to a rise in real wages. During 2007-12, rural wages soared by an unprecedented growth rate of 8.3 per cent per annum in real terms, thanks to increased non-farm employment opportunities in a booming economy aided by improved road and telecom connectivity. This was further enabled by rising crop prices that made it possible for farmers to absorb the wage increases. MGNREGA was not the sole factor responsible for this uptrend. Factors such as agricultural productivity, construction sector growth, migration to cities, and literacy also majorly contributed to the rise in rural wages, benefitting more than 40 per cent of rural population dependent on casual labour. 

The largest increase in non-agricultural employment has been in the construction sector, where the share of employment in rural areas increased from 14.4 per cent (1999-2000) to 30.1 per cent (2011-12). But with the stagnation in the crop sector after 2012 and slump in construction activities, rate of growth of wages shrank in 2014 and 2015.  

However rural wages began rising in 2016 after stagnating for two years, indicating that the slowdown in rural demand was temporary. Despite demonetisation, rural wages rose by 7.3 per cent in 2016-17 over the previous year. Expenditure on wages in MGNREGA has also picked up, from Rs 24,209 crore in 2014-15 to Rs 40,836 crore in 2016-17. The figures show that some of the poorest states such as Assam and Bihar have shown remarkable progress in the last two years. 

Rising Rural Consumption

The impact of higher agricultural growth combined with spurt in wages is also witnessed in the rising consumption in rural India. A recent article in The Economic Times (14 July 2017) concludes that consumption growth in rural India was in double digits for the first time in two years and outpaced the rate of expansion in cities, underpinned by higher farm income after last year’s good monsoon rains and minimal supply disruption in the run-up to the roll-out of the single producer levy. Rural demand has also helped drive the overall FMCG sector growth to 10 per cent now, compared with about 5 per cent during the quarter-ended March 2017. Rural markets account for more than a third of all consumer goods sold. The impact of a good monsoon should spur even stronger growth in the second half of the year.

Over the past decade, sales of branded daily-needs in a nation of 1.3 billion people have increasingly relied on the vast rural hinterlands, home to about 800-million-plus people whose purchase behaviour is largely linked to farm output. Therefore, annual monsoon rains that help irrigate Indian farmlands play a vital role in shaping buying patterns in Asia’s third-biggest economy and below-par rains over the past couple of years had often been blamed for stagnant sales growth, wrote The Economic Times.

According to a recent study by Motilal Oswal Group, 2017 will be a second consecutive year of normal monsoons and has significant positive implications for rural consumption. Given the confluence of several positives like normal monsoon, higher MSPs, farm loan waivers and higher government spending in rural areas, rural consumption is poised to make a further recovery after remaining in hibernation for the last three years.

Rural consumption has been positively influenced by satisfactory growth in poorer states that have a significant rural population in the last four years.

Rural Infrastructure

Building infrastructure, while creating jobs, can also have a lasting positive impact on human productivity and incomes. NFHS-4 and census data shows that the number of households having electricity has shown excellent progress after 2011 even in poorer states.

“Electrification brings significant consumption gains for households in many ways. Labour earnings are an important channel of impact,” said Saxena. 

Similar progress has been achieved in construction of new rural roads under PMGSY. A total of 1,78,184 habitations have been identified state-wise to be targeted for providing road connectivity. States have so far provided connectivity to 1,27,427 habitations. It is significant that more than two-third of the total length constructed is in poorer states. 

Roads are a lifeline for rural communities, linking them to markets, education, health and other facilities. In many cases it was seen that road construction attracted investments made by people in tempos, shops, and real estate. Many new income opportunities and small enterprises have thus flourished simply due to the rural roads.

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