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Rejuvenation of the Rural Economy: The key to stability in Post-Covid India

Updated: Jun 6, 2020

Pratik Kumar

At a time when the pandemic has pervaded into every nook & corner of policy making, recent days bear witness to the fact that the public has seen an imperative balancing of discourses concerning healthcare and economy. The prolonged shutdown of commercial activity has already pushed the indicators of economic health in a state of doldrums. A multi-centred approach is the need of the hour to take the economy out of this crisis. As far as adequate response is concerned, the government has chosen to come up with a widely agreed plan of a fiscal stimulus package. Though it seems this step was suggested primarily by the fiscal hawks, people at the realm of affairs should realize that injecting money into the market and its appropriate allocation are entirely different things, which in turn actually determines the effectiveness of this package.

How the grim situation of migration, unemployment is going to unfold itself in upcoming weeks or better to say months? What’s the medium term imprint it has left for restructuring the economy? And the most important question-- What are the steps that we have to take for realizing the goal of ‘Self- Reliant India’?

Before this crisis, the economy was already facing a slowdown (in last financial year 2019-20), thereby, meaning that a part of the workforce (particularly urban lower income class) already stood on the verge of losing their jobs. Subsequently, their employment aspirations have been shattered by this pandemic either completely or for at least a year till its effect diminishes. The resultant unemployment, which was in any case inevitable, carries one peculiar feature in its trend. Surprisingly, it has not cut across uniformly in both rural as well as urban India. A recent survey by Azim Premji University shows that the loss of employment in urban areas is pegged at 80% vis-a-vis 57% in the rural area. Not only this, there is also a stark difference in the impact of lockdown on urban and rural households. The households which lack resources to buy even a week’s essential items are 61% in urban India as compared to 34% in rural one. With the gloomy pictures of millions of workers on roads, one can easily imagine that urban migrant workers are the worse hit as far as unemployment is concerned than their rural counterparts. The actual impact in the urban area is yet to be assessed, which is difficult, due to the unorganized nature of work in big cities owing to informal demand and non-contractual nature of work.

So what describes this wide divergence in the effect? While it is true that the shutdown of activities is the main reason behind this mass migration, it can hardly be denied that its actual reasons are much wider and deep rooted in lack of adequate social security, employment and livelihood. Such interruptions in economy makes a large group of workers alienated from the mainstream. Though the issue certainly needs a wide discussion, but for now, the government should look forward to the quick resumption of economic activity, especially after such an upheaval in the working sector.

Before we ponder over this issue, a few key points must be borne in mind, which appear to be more or less settled by the ongoing ravage of this pandemic. Firstly, the migrants aren’t returning back to cities, not at least for a few months in wake of recent hardships that they have faced in the backdrop of pandemic. Secondly, even if they return, there is a high chance that a sizable workforce is likely to remain in their native areas. Lastly, it’s going to create a labour surplus in the rural areas due to huge numbers of workers available in the labour market. Combining all these factors, policy makers with a biased stress on urbanized policy making must concede to the fact that contrary to the popular opinion, the solution of this demand shock rests in a healthy rural economy.

If one analyzes the recent relief package, the union government should be credited for identifying this issue in its bailout plan. With an additional 40,000 crores for MNREGA and other slew of measures amounting into lakhs of crore for agricultural market, fishery and animal husbandry, the government has rightly set its priorities for the informal economy. We have neglected the role of informal rural economy since long at the cost of our own peril. Thus, we most often tend to see the actual demand originating from the urban markets only, which is in sharp contrast to the ground reality. The proposed stimulus through such measures is likely to boost consumption, which in turn, would cause a hike in the actual aggregate demand. The idea of pushing mass consumption through money in the hands of poor workers, as suggested by economists, actually rests on the logic of propensity of poor to spend more and save less.

As it has been noted above, the allocation of money and its effective allocation are two different things, a few ideas should be looked upon. Until and unless the injected amount reaches into proper blocks of the economy, where they are targeted, its purpose at large would be defeated. At this juncture, the prime focus of the government should be the opening of food grain stocks for the poor. Though the union government has asked states to open godowns, the actual relief by states is yet to come. The faster government moves to address the issue of starvation, the better results it would give in mitigating the demand shock. With the saving of wages and salary of lower income groups on food grains, a considerable amount of salary would become disposable income to be used in the markets, which would then regulate the staggering demand of goods of mass consumption; i.e. FMCG goods. There is also a need for revolutionary change in the way government behaves with the rural markets. There has been a consistent demand from the farmer community to look at the nutrition policy from the needs of rural populace in recent years. For instance, the essentials in the mid-day-meal like eggs can be procured from the local markets. It not only serves the purpose of actual self-reliance but also leaves a wide scope for rural entrepreneurship. We need to understand that the “more than needed” involvement of rural workforce in the agricultural sector isn’t problematic actually; what needs to be done is its proper displacement in different supply chains. Large scale engagement in new projects, for instance, in fisheries, horticulture, dairy is required for doing this. When the nation is undergoing important structural changes, a clarion call by the top leadership might change the overall face of Indian economy.

The recent call of the prime minister for a self-reliant India is nothing but a nicely woven vision, which assimilates the ideals and aspirations of two of the seminal thinkers of this nation- Mahatma Gandhi and Pt. Deen Dayal Upadhyay. The situation in the economic sphere has completely changed with the advent of this pandemic, which requires careful and long-term planning. As Gandhiji said: “The future of India lies in its villages”, only an engaging collaboration with the large population comprising labourers, farmers and other low-income groups, i.e., small traders, fishermen etc. will serve the need of the hour.

The author is a LLB student, National Law University, Lucknow and is an intern at Academics4nation



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