Looming danger of rural disruption in India

Even in the twenty-first century, India is a rural economy. Majority of people in India, still, dependent directly or indirectly upon agriculture for their livelihood. Though the service sector dominates the GDP of the nation, but it is the agriculture sector that has provided the latent support to the economy. It was only the agricultural sector that has actually kept the Indian economy in momentum last year, when the pandemic erupted for the first time. Growing at the descent growth rate of 4 percent, it proved out to be the lone warrior in the midst of crisis. 

Agriculture-the saviour

We have had large stockpiles of food in our godowns, which has helped and is helping in meeting out the food requirements of our people. As per the recent data of FCI, there is 304.85 MT of rice stock and 515.65 MT of wheat stock in availability as of May. Not only that, agriculture does assist in providing the raw materials for the manufacturing industry. Ostensibly, it would help in keeping the momentum of the job market in India during such pandemic times, though, only to some extent.

But the more important role of agriculture, during such a pandemic, is to keep the macroeconomic cycle of the nation, free from fluctuations. As the rural sector dominates the populace in India, the consumption potential of the nation functioned upon the rural sector to a great extent.

 Rural sector- inflation crisis

The Second-wave of pandemic is now disrupting the hitherto untouched rural sector of the nation. This has impacted the inflation level, unfavourably. On the demand side, now the consumption potential of the rural sector has been curtailed. Whereas, on the supply side, the imposition of restrictions on account of the rising pandemic crisis has led to supply disruptions. This has further been assisted by AG Adeeth Cariappa and others in their paper ” Impact of COVID-19 on the Indian agricultural system: A 10-point strategy for post-pandemic recovery”, where they have mentioned that pandemic has led to logistic constraints and has also adversely affected the consumption pattern.

International influences

The rising tension in the Middle East will further add up to the problem. The Brent crude oil prices might experience a surge to an average of $58-63 per barrel in 2021 in comparison to $42.3 per barrel in 2020, a projection made by CRISIL.

Moreover, the world economy is not in a mood for exaltation. The export of agricultural products, therefore, will bound to suffer. Further, with the logistic disruption, the problems in the manufacturing sector will resurface, which will reflect Itself in the export potential of the manufactured goods from India. In addition, the rise of global food prices will have a synergic impact upon food inflation in India. As per the recent study of RBI, a 10% rising in global food prices could escalate food CPI to a level of about 0.7% in the short run, and up to a level of 3% in the long run.

Steps to be taken

There are certain steps that need to be taken on a short-term basis, so as to rekindle the situation.

Primarily, the containment of rural pandemic should be the utmost concern. For this, appropriate resources have to be drawn and shifted towards the rural sector. The hospitals in the proximity of the rural sector need to be adequately equipped to deal with the pandemic on a short-term basis. It will also help in restricting the affected individuals to come to the urban areas for better treatment of their infection. Secondly, to keep the momentum of the logistics and supply chain network, special vehicles needed to be arranged. Such vehicles need to be properly supervised and organised, so that these may not turn out to be the source of pandemic.

Further, to keep the consumption pattern of the rural sector unaffected, direct cash transfers is the immediate requirement. Many economists have already worked out the methods of disbursement of the same in the past. Finally, the schemes like MGNREGA, which have shown promising results in the past, need not only to continue with full vigour but,  at the same time, modifications should be made. For example, enhancing the overall wages of the farmers, widening the scope of the scheme like construction of health- centres under the scheme, etc. 

Overall, pandemic has made the bad situation of the rural economy. worse of its kind. It now rests upon the sagacity and fine judgement of the present government, that how they are going to handle the situation.

About the author

vipal

My name is Vipal Bhagat, going to be doctorate in applied economics. My aim is to analyse and interpret the current economic happenings around us, according to the core and basic principles of economics.

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