Rural economy is the key to revival of Indian economy

Relevance: Decline in the GDP due to COVID, the role of agriculture and rural employment generation in the revival process  

Synopsis: The rural economy continues to remain crucial for any strategy of economic revival. 

State of economy: 

• As per the National Statistical Office (NSO) the Indian Gross Domestic Product (GDP) declined by 7.3%. 

• This was partly a result of a slowdown in economic activity since 2016-17 and partly result of a mishandling of the economic situation. 

• Indian economy suffered during first wave that is why any claim of recovery this year will be only statistical due to low base of last year rather than a real recovery. 
• Small and medium enterprises as well as the large unorganised sector have suffered severely during both the waves of pandemic. 
• Agriculture became an important contributor to the economic performance. 

• It showed the resilience of the rural economy. 
• Even though rural areas were the first point of refuge for a majority of migrants, agriculture was the only major sector which reported an increase in Gross Value Added (GVA) in 2020-21.  
• The average growth rate of agriculture GVA in the last five years, at 4.8%, is significantly higher than the GVA growth of the economy, at 3.6%, in the last five years. 

Why there is need to focus on rural economy for revival of the Indian economy? 

• Firstly, agriculture sector which is saviour of the economy is suffering from neglect and policy missteps by the Government.  
• Secondly, the second wave affected rural areas in terms of health and livelihoods.  

• Economic distress in rural areas is also unreported and underestimated. 
• People have spent a large sum on private health care expenditure. 
• It has led to sharp rise in indebtedness from non-institutional sources. 

• Thirdly, the Government has not increased the allocation for the National Rural Employment Guarantee Scheme (NREGS) despite an increase in employment demand in NREGS. 
• Fourth, prices for dominant agricultural commodities in the domestic market are declining while consumer prices of essentials such as edible and pulses are contributing to rising inflation. 

• The latest estimates of April 2021 showing a decline in rural non-agricultural wages by 0.9% per annum. 

• Lastly, rising input cost and rising inflation further reduces the purchasing power of the rural economy.  

• Rise in input prices for diesel and increase in fertilizer prices have also added to the misery of farmers.  

Way forward: 

• Proactive intervention to protect the rural population by speeding up vaccination. 
• Need of greater fiscal support in terms of direct income support. 
• Indirect support in the form of subsidies and protection from the rising inflation in input prices is the need of the hour. 

Hence, the urgent intervention in rural economy is not just necessary to support economic revival but also to prevent another humanitarian crisis. 

Source: The Hindu