India’s rural economy faces many challenges, including poverty, unemployment and agrarian distress. To address these issues, there is a need to focus on rural industrialisation (especially on women-owned non-farm enterprises).
The expansion of such enterprises can improve employment opportunities in rural areas (especially for women) with the growth of GDP.
State of India’s Rural Economy:
Rural Demographics:
As per Census 2011, 68.85% of India’s population lives in rural areas and NITI Aayog estimates that this figure will remain more than 50% (reflecting the importance of rural India in the socio-economic landscape of the country) even in the year 2045.
The standard of living:
As per Census 2011, about 39% of rural households live in one-room accommodation, and only 53.2% have access to electricity, compared to 92.7% in urban areas.
86% of rural households used traditional fuels such as wood for cooking, and only 30.8% had access to tap water, highlighting the challenges in infrastructure and facilities.
Rural Poverty:
The Tendulkar method shows that rural poverty was alarmingly high at 41.8% in 2004-05, which declined to about 25% in 2011-12.
However, the poverty ratio was still over 35% in 6 states in the year 2011-12.
Monthly Consumption Expenditure (MPCE) per capita in rural areas is significantly lower than urban levels, reflecting limited consumption potential and acute poverty.
Employment:
The PLFS (Periodic Labour Force Survey) Report 2023-24 states that rural employment is mainly characterised by self-employment (53.5 per cent) and casual labour (25.6 per cent).
A significant proportion (which provides seasonal employment).
Salaried jobs in rural areas constitute only 12% of the total workforce, and most of these positions lack contractual, paid leave and job security.
ILO’s India Employment Report 2024 shows that unemployment among educated youth has almost doubled from 35.2 per cent in 2000 to 65.7 per cent in 2022, with women (76.7 per cent) facing higher unemployment than men (62.2 per cent).
From 2017-18 to 2023-24, 150 million jobs were added in India, with rural women contributing 54% of this growth, especially in agriculture.
Rural women workforce participation increased by 12.5 per cent to 34.8 per cent in 2023-24.
Agricultural distress:
Small and marginal farmers, who constitute 86% of the agricultural population, own only 43% of agricultural land, while large farmers with economic holdings manage 53% of the land.
Agricultural laborers, who make up a larger share of the rural workforce than landowners, face seasonal work, low wages, and a lack of social security measures, including medical assistance and pensions.
Challenges faced by rural economy in India:
Stability in the manufacturing sector:
India’s manufacturing sector has stabilized, contributing only 15% to GDP in 2023, down from 16.1% in 2014-15.
The challenges of spatial planning:
The shift from agriculture to manufacturing has been slow and uneven in India, with over 40% of the workforce still employed in agriculture, compared to 20% in China and 2% in the US.
Issues related to infrastructure:
The de-urbanisation of manufacturing in India has shifted organised manufacturing from urban areas to rural areas, leading to cost reduction, but growth has been hampered by inadequate rural infrastructure.
Small towns and rural areas are emerging as engines of economic growth in India, where more than half of the urban population lives, and are projected to grow significantly by the year 2050.
The challenges of investing:
Private investment in rural manufacturing is limited factors such as poor physical infrastructure, lack of reliable land records and distorted capital markets contribute to this low investment.
The absence of efficient resource allocation mechanisms has restricted the entry of newer, more efficient enterprises.
Measures to promote rural economic development in India:
Investments in infrastructure:
Significant investment in rural infrastructure, including roads, power and telecommunications, is necessary to create an environment conducive to manufacturing growth and economic growth.
Promotion of MSMEs:
Policies should focus on empowering Micro, Small and Medium Enterprises (MSMEs) by ensuring easy access to credit, land and skill development programmes.
Encouraging MSMEs will boost entrepreneurship and create jobs, especially those that cater to rural needs.
Policy shifts towards developing smaller towns as industrial hubs is important for balanced regional development and reducing urban-rural disparities.
Focusing on skill development:
Skill development programmes should be tailored to the needs of the industry to enhance the employability of the rural workforce, especially in the non-farm sectors.
This will ensure that they are prepared for the possibilities arising out of rural industrialization.
Promotion of women-owned non-agricultural enterprises:
These enterprises contribute to economic growth by promoting enterprise, income diversity and financial inclusion.
For India to achieve a GDP growth rate of 8% by 2030, more than half of the newly created employment must be women.
It is important to formalize these enterprises and provide targeted business and financial support through business sector lending.
The rise of digital infrastructure:
Expanding digital infrastructure, including internet reach and mobile connectivity in rural areas, will include women’s participation in non-farm sectors.
This will help women to leverage fintech solutions for better financial access and efficient business management.
The Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) has played an important role in rural electrification, providing electricity supply to more than 18,000 villages and boosting economic activities.
Support to MSMEs:
Micro Units Development and Refinance Agency Limited (MUDRA)
Credit Guarantee Scheme for MSMEs (CGTMSE)
SFURTI (Scheme of Fund for Revival of Traditional Industries)
