Rural economy accounts for about 70% of employment and 50% of GDP with agriculture being the main driver followed by services and manufacturing. It is largely unorganized and hence it is quite complex given the fact that most of the dealings are done in cash and while there has been some intrusion of credit cards, debit cards and ATMs; dependence on technology driven payment systems is still limited. The recent demonetization drive has hit them the hardest.
Rural Economy | Current situation
- A number of states have been declared drought hit. Over a long period of time after having an increase in wages in the rural areas as a consequence of recession worldwide, India witnessed a decrease in the level of wages. This is a fact which has been reconciled by the policy makers of the country also.
- The outcomes of MNREGA speak in terms of the fact that the number of work days on an average for a family has been 49 far lower than what it optimally should be for a particular period given that there is a crisis of sorts.
- The MNREGA has also contributed towards creation of minor irrigation works, check dams etc. which has helped in enhancing the irrigated area under cultivation within our country.
- Initially the agriculture had the spillover effect of droughts of last two years which had hit the farm economy very severely.
- Indebtedness of farmers increased and now in this particular monsoon season, the kharif season was better because of which agricultural output improved and it is expected that rabi season will be good because of improved soil moisture.
- To some extent, demonetisation has hit the rural economy as it thrives mostly on cash and because of this, their harvest is not getting good price and the labour and transportation costs are also not getting covered even in the areas with close proximity to the cities.
- From crop farming, an average family earns Rs.3081 per month which is very low and for marginal farmers, it is very difficult to survive. Whatever they earn is spent on day to day consumption without savings.
- Unless there is a drastic change in the approach of farming like technological breakthroughs which reduces the cost of production for farmers improving their profitability like soil health cards. This can also be done by reducing the rates of interests or removing it.
- Co-operative banks are not so successful because they have been captured by political people at the top which needs to be checked.
- It was being hoped that due to good monsoon, this year would become the recovery year, but demonetization has shattered this hope.
Rural Economy | Steps to be taken ahead
- Long term credits should be forwarded by NABARD and the Regional Rural Banks. Until this situation of lack of credit improves, private investments will remain negligible.
- Insurance sector needs to be strengthened. Though there is Pradhan Mantri Fasal Bima Yojana but more has to be done with regard to implementation of schemes.
- The net of National Agriculture Market should be widened to include e-marketing which is a very good thing for integration of markets.
- Marginal farmers should be taken out from the clutches of moneylenders who are harassing the farmers in the name of credit. Post-demonetisation, Government has an added advantage to address this issue.
- Co-operative institutions have to be built at the grass root level and sharing of common facilities like tractors, micro irrigation etc.
- Dairy, poultry and agro-processing sector can be improved side by side.
- MGNREGA like employment flagship programmes have to be used efficiently.
- Government should consider giving short term loans to the farmers can be given by increasing the priority sector lending threshold (of agricultural loans).
- Government should also try to build consensus over passing of the long pending ‘Model Agricultural Land Leasing Act’ to formalize leasing of agricultural land.
Rural Economy | Conclusion
The rural economy in India should target to generate better momentum in the next few years with the help of increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs and time, improved port gate management and better fiscal incentives would contribute to the rural economic growth. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers.
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