The new economic package and the fate of rural India: Can it revive the dwindling rural economy?

Updated: Jul 28, 2020

By Avi Anuj Jain

How the rural economy in India is dominantly dependent on the economic activities in urban trade centres? The trade of agricultural produce, labourers migrating to cities and industrial areas and prospective development projects are some of the critical aspects of a rural economy governed by the trade outside the rural economy. Moreover, the bigger question at present revolves around the revival of the dwindling rural economy. The economy is in tatters in the amidst the COVID 19 crisis when the entire country is under a lockdown. What needs to be achieved and the course of action taken by the rural economy are topics of apex importance to us. The challenge will be to empathize on the social and economic front, migrant workers who have returned (most of them within state borders) and are unlikely to return to urban trade units as labourers in the near future. The so-called dream of better life and livelihood in the urban sphere for migration is not likely to work in the foreseeable future, with urban employment opportunities also truncating significantly due to the economic crisis. Adding to that is the neglect and brutality encountered by migrant workers during the lockdown, which would serve as a further deterrence. Now that so many of them are home early, they have to find jobs to make a living in the rural space. Otherwise, societal conflict and violence would break out earlier rather than later. How to address unemployment in rural areas would be a central problem. The bigger question of rural economy revival revolves around the grand economic package announced by the central government. The compensation economic package, including fresh initiatives and earlier strides declared by the Minister of Finance and the Indian Reserve Bank, will be worth Rs 20 lakh crore. Finance Minister Nirmala Sitharaman declared relief for the Rs 1.7 lakh crore poor and Reserve Bank of India launched a set of liquidity steps and lowered levels to their lowest level. Since the MSMEs have been brought to highlight, the overall face of the new revival strategy presents an unpredictable future. A lot of stress has been given on delayed tax application and the revamped accessibility of the loans. However, a lucid impact still assumes a blurred panorama of things. Coming back home to migrant workers, the increased consumption of food by migrant workers now in rural areas would certainly raise demand for food production in the rural market, but not for other consumer goods. As a result, the availability of marketable surplus to the industrial economy should decrease to some degree. This might boost the local rural economy. However, as cash transfers sent earlier by migrant workers from urban centres have dried up, the consumption of consumer goods may decline sharply in the rural economy. Wages on-farm labour are also expected to decrease following the flood of migrant workers pursuing jobs in the rural sector. In turn, rural communities would need to create jobs and income opportunities internally.


The recent PM’s address to the nation also stressed upon the protection and growth of farmers in the country. Recession in industrial sectors would still have a bearing on agriculture. Major farmers as well as those processing cash crops for agro-based markets and the distribution or selling in urban markets of their products, such as animal husbandry, poultry, fruit and flowers, would be struck the most. The new economic package, in that case, is expected to provide better bargains to the farmers in the marketplace while retaining adequate compensation for the economic loss amid the lockdown. The picture will become conspicuous as the new aspects of the grand economic package are discussed in the coming days. However, the rural economy still requires an influx of state’s support in maintaining better infrastructure and accessibility to the emerging and foreseeable economic crisis.