A rural resurgence will fuel India's economic recovery


India has just experienced the wettest June since 2013, according to the India Meteorological Department data. The rainfall was 15% above normal. Barring pockets in the Himalayan states and western Uttar Pradesh, the distribution of rain during the month was phenomenally even. There will be a normal monsoon this season, the Met department has forecast.

With rainfall comes hope, especially in rural areas and agriculture belts. And as the Covid-19 pandemic brutalises the country’s economy and paralyses its urban growth centres, a faint glimmer of light arises from rural India — often referred to as Bharat. Economists and corporate honchoes are on the same page: the panacea for the growth problem is likely to come from Bharat as India limps back to normalcy. The very fact that tractor sales have bucked the auto slump — in May, tractor sales in the domestic market registered a decent 4% growth year-on-year — indicates the rural economy may be in better health than the urban one.

But a good monsoon is not the only reason why policymakers and India Inc alike are anticipating a rural resurgence. They point out to three things: First, farming continued even during the lockdown that started March 25, while manufacturing languished. Second, more land has been under cultivation this year, according to preliminary assessments by government agencies. Third, many factory workers who returned to their rural hometowns as jobs evaporated in the cities are now involved in farming activity. These factors, and the lack of any other positive sentiment in the near-term, have convinced corporate India, particularly those with a wider rural portfolio, to focus on consumers in Bharat.

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Harsh Goenka, chairman of RPG group, is confident of a robust demand coming from the interiors. “The land under cultivation has set a new record this year. If monsoons are adequate, we should have yet another bumper kharif crop. That will give a fillip to rural demand,” says Goenka, whose company also sells tractor and trailer tyres — considered a barometer of the rural economy.

Since the lockdown began, cigarette-to-biscuit conglomerate ITC Ltd has launched five new products in the hygiene and wellness segment, including a 50 paisa hand sanitiser sachet for rural consumers, says the company’s executive director B Sumant. “Health and wellness, hygiene and immunity-boosting products are now at the forefront of consumer demand even in rural markets. Awareness among consumers on health and hygiene has got heightened across both urban and rural India.” Sumant points out that his company does not see rural consumers as being very different from urban consumers in all categories. “The divide in aspirations and consumer behaviour has been narrowing over the years,” he says, adding that tends to widen the rural market.

But do farmers share India Inc’s optimism?

In Uttar Pradesh’s Gautam Buddha Nagar — a district on the outskirts of Delhi — two farmers have contrasting stories to share about the state of their businesses since the lockdown was announced. At Khodna Khurd, Satyender Kumar says he got cheaper labour in April to harvest wheat on his 20-acre land. The produce, weighing about 300 tonnes, were ferried in six tractor-trips to Dadri’s wholesale market. Now, as the rice season begins, he has hired eight labourers from Hardoi, some 300 km away, to work on his fields. “For those of us who cultivate wheat and rice, the lockdown had zero impact. Instead, we profited a bit as labourers were willing to work for lower wages because there was no other work once the lockdown began. Those who cultivated perishable items such as vegetables faced a serious problem,” he says.

The story of profit turns to one of loss just a few km away.

In Tusyana village, floriculturists say they suffered a loss as demand dried up in Ghazipur’s wholesale market. “Temples and mosques were closed. Even after these were reopened, no one was allowed to go in with flowers. Also, big marriage functions are not happening. Where will demand for flowers come from?” asks Keshav Saxena, one of the several workers plucking roses on a 50-acre field. Hopefully, the roses won’t get wasted completely as makers of incense sticks procure dried flowers, even though the farmers will get much lesser remuneration.

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The growth stimulus, however, will now have to come from rural areas, says the Prime Minister’s economic adviser, Bibek Debroy. “The Union government has announced measures to improve agricultural marketing.

But the results of those depend on implementation by states. There has to be more rural reforms, including land. Rural India can provide a growth stimulus, but not as a substitute for urban, which will revive in due course,” he says, adding that the rural-urban lens, used for Census, can sometimes be misleading, given the heterogeneity within rural and urban pockets.

The consensus that rural India will lead the nation’s economic revival has been backed by recent sales numbers, too. Tractor sales — seen as an important barometer of the rural economy — were up in May. In June, numbers released by companies so far have shown a massive demand for tractors. Escorts Ltd, for example, said it saw a 23% sales growth in the domestic market. Mahindra & Mahindra reported a 10% rise in sales in June. Even the tax numbers have a rural flavour. A simple analysis of the June numbers of the goods and services tax (GST) shows shrinkage of revenue in Delhi, Haryana and Gujarat — states with a substantial urban population. A comparatively robust growth was registered in the predominantly rural states. For example, in June, Madhya Pradesh and Chhattisgarh saw an impressive GST growth of 24% and 22%, respectively, from a year ago.

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But an economic resurgence in rural India can have a downside too. What if farmers end up producing plenty, thereby disrupting the demand-supply equilibrium? Prices of agriculture products will fall sharply, impacting the farmers themselves. Theoretically, exporting the surplus should level out the problem. But it is not that simple in practice.

Nitin Agarwal, managing director of Mumbai-based grapes exporter Euro Fruits, says fruits that are exported might not find takers in the domestic market. “The grapes we export to the UK and Europe are bigger and have lesser sweet content. So, a variety can’t be exported just because there is a surplus in the domestic market,” says Agarwal.

To tackle a sudden spurt in agriculture production, the government should have a well-calibrated strategy ready for immediate deployment. In the meantime, it should try and find a way to encourage rural growth and spread those gains across the country.





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