Snap Analysis

The lights are shining in rural India

India Global Business Staff

At a time when urban growth and discretionary spending are under check, due to the pandemic, the experts are predicting that the country's economic resurgence will emanate from rural areas and Tier 1 and Tier II cities.

India is recording many success stories as the country fights against the pandemic, but perhaps the most telling message that is coming out of these challenging times is that rural India is the real deal and it would not be contrary to predict that the government will go all out to bridge the rural-urban divide in the country.

Rural India is fuelling the economic resurgence across India. This also applies to Tier I and Tier II cities where the incremental purchasing power has gone up significantly stimulated by demand. Incentives and reforms launched by the government, coupled with bumper harvests, aided by a healthy monsoon season, have resulted in cash coming back into households and, by virtue of this, expenditure on consumer durables and non-durables are rising.

Funding for the underprivileged, reforms and taking products to the rural doorstep will not be enough to fuel rural growth, the government must also focus on furthering skills and economic opportunities for its citizens.

Engine of growth for 2-3 quarters

The inhabitants of rural India could be the deliverer that the country is looking for as they possess the means to drive economic growth for the next two-three quarters. It is therefore, expected that companies are now targeting their products focusing on distribution, outreach, promotions and product placement to accelerate spending there.

Funding for the underprivileged, reforms and taking products to the rural doorstep will not be enough to fuel rural growth, the government must also focus on furthering skills and economic opportunities for its citizens.

Equal stakeholders

The transformation of India can be witnessed by all, more so by the country's rural inhabitants thanks to the access of information. They must become equal stakeholders in the country's progress given that their aspirations are the same as anybody else's.

The transformation of India can be witnessed by all, more so by the country's rural inhabitants thanks to the access of information. They must become equal stakeholders in the country's progress given that their aspirations are the same as anybody else's. When these goals are not realized then disappointment begins to creep into the system, especially among the deprived. Hopes dry up and with it the idea of creating a prosperous India gets derailed and delayed particularly when urban growth and discretionary spending is curtailed although the macro indicators of growth are evident in rural India. It is here that prime minister Narendra Modi's pledge gets underscored - 'Sabka Saath; Sabka Vikas; Sabka Vishwas'.

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So, while the pundits are deep diving into their data and predicting economic contractions the more proactive companies are hoping to orchestrate the revival through rural India and this would be powered by higher farm income, aided by good monsoons, government stimulus and a reduced impack from the lockdown on agricultural activities.

Preparing for the rural bounceback

Companies are pinning hopes on a rural bounce back fuelled by higher farm income, good monsoon, government stimulus and reduced impact of lockdowns on agriculture activities.

Companies are pinning hopes on a rural bounce back fuelled by higher farm income, good monsoon, government stimulus and reduced impact of lockdowns on agriculture activities, as macro indicators suggest challenges in the immediate term to a revival in the overall economy.

On Monday, a report by credit ratings firm CARE Ratings said the southwest monsoon, with rains at a six-year high so far, could be the catalyst for rural demand. The agriculture sector contributes nearly 15% to GDP, and the economy is banking on the farm sector to grow 3.5-4% across all quarters this year to prop up overall economic growth, it said. While company executives cautioned about the risk from the spread of Covid-19 in rural and semi-urban areas, they said much of the focus this year was on these markets.

Workers wearing masks work after the government exempted farming and other activities from the lockdown. The economy is banking on the farm sector to grow.

Companies like Britannia Industries, PepsiCo, Coca Cola, Dabur, Saffola oils, Parachute hair care products, Lay's, Kurkure, Uncle Chipps and Hindustan Lever are all preparing on a war footing to try and stay ahead of the rural curve in a bid to cash in on and invest in the buoyancy prevalent there and expand the rural footprint with their product services.

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Creation of micro-entrepreneurs

The engines of rural growth have been ignited with around two-thirds of India's billion plus population living in villages and small towns the resurgence of the economy from there will have a knock on effect on investment, consumption, government expenditure and exports.

There is huge potential in this area and this can be gauged by one isolated, but simple, fact - in the past five years till 2018, agricultural startups raised nearly $170 million.

Through its reform measures - investing in roads, electricity, irrigation and cold chain grids - the government has already recognised the need to create micro-entrepreneurs. It is aware that welfare funding does not necessarily eradicate poverty, rather it only addresses its symptoms. Attention to upskill the rural inhabitants and create economic opportunity is a more balanced remedy in the long run.

The shift from a labour-oriented job creation to a knowledge-led job creation will ensure that the lights are constantly on in rural India and the rest of the country gets a clear view of its unlimited potential.

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