Rural Economy as Saviour

  • IASbaba
  • July 2, 2021
  • 0
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  • GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
  • GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Rural Economy as Saviour

Context: Decline in GDP began even before COVID-19 Pandemic which has made economic recovery challenging

  • The pandemic & its mishandling has only worsened an already fragile economic situation. 
  • Agriculture was the only major sector (other than electricity, gas, water supply and utility services) which reported an increase in Gross Value Added (GVA) in 2020-21. 
  • It not only provided jobs to returning migrants but also sustained the economy in the rural areas.

It is difficult for rural sector to play saviour again because of the following reasons:

1. Disproportionate impact on rural areas:

The second wave affected rural areas disproportionately, both in terms of 

  • Health – Huge expenditure on private healthcare
  • Livelihoods- Loss of earning members

2. Possible Debt Trap: As a result, rural areas can witness a sharp rise in indebtedness from non-institutional sources

3. Incommensurate response from the Government

  • For the country as a whole, despite an increase in employment demand in NREGS, the person-days generated in May 2021 was only 65% when compared to May 2020. 
  • While the free food-grain scheme has been extended this year as well, it does not include pulses as was provided.
  • Similarly, there has not been any cash transfer to vulnerable groups, unlike last year

4. Inflation Threat

  • Rising inflation further threatens to reduce the purchasing power of the rural economy struggling with declining incomes and job losses
  • The rise in input prices for diesel and fertilizers further adds to the misery
  • Rural non-farm sector already struggling from low demand has now seen its profit margins getting impacted due to the increase in the cost of raw material.

Way Ahead

  • Recognition by government about the importance of rural sector in economic recovery and proactive intervention.
  • Speeding up vaccination in rural areas
  • Greater fiscal support for rural areas (increased MGNREGA, PDS allocation)
  • Protection from the rising inflation in input prices through subsidies

Connecting the dots:

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