By Prof. Raj Kishore Panda in Bhubaneswar, May 5, 2021: India is predominantly a rural economy. As per 2011 Census, 68.8 percent of the population and 72.4 percent of workforce of the country reside in rural areas. Studies have shown that over time the Indian rural economy has undergone significant changes in terms of composition of output and employment.

Analyzing the data at the all-India level the study of Chand et al (2017) reveals that between 1970-71 to 2011-12 the share of non-farm sector to rural output and employment has increased while that of the farm sector has fallen. Yet, in spite of this transformation the contribution of rural sector to the country’s NDP has fallen 62.4 percent in 1070-71 to 47 percent in 2011-12 implying that worker productivity in non-farm activities remains at a low level.

Interestingly, contrary to general expectation, the rural economy and particularly the agriculture sector have shown higher resilience in the most recent year (2020-21) in the face of the adversities of the Covid-19 pandemic and consequent national lockdown (Economic Survey, Govt. of India, 2020-21). As the data reveal, the agriculture sector clocked a positive growth rate of 3.4 percent while all other sectors during this period slided. The share of agriculture in the country’s GDP increased to 20 percent after a gap of seventeen years (last was in 2003-04). Food production in the country reached a record high and there was 56 percent increase in allocation of food grains under National Food Security Act in 2020-21.

Alas, the country is now passing through the second wave of Covid-19 pandemic and the virus this time has become more infectious and deadly. As reported by different media agencies, the pandemic this time has made rapid inroads into rural areas. In view of the fact that the rural India lacks in basic infrastructures- physical and social, there is grave apprehension that the pandemic would adversely affect the rural economy derailing the growth rate it has achieved last year.

In the development literature, we come across the works of many scholars where they have voiced strong critical opinion towards the urban-biased development strategy followed by the LDCs leading to perpetuation of large-scale poverty in rural areas. In his monumental work ‘why poor stays poor—‘ the eminent development economist, Michael Lipton argues how the government policies in LDCs favours industry at the expense of agriculture perpetuating poverty in these countries.

Reviewing the work of Michael Lipton the distinguished economist Prof. V.K.R.V.Rao has been categorical in arguing that perpetuation of poverty in rural India has been because of urban biased development strategy followed with increasing attention on industrialization neglecting agricultural development. The observation of Prof. V.K.R.V Rao is found reflected when we analyze the Socio-Economic Caste Census ( SECC) 2011 data for rural India. The data of SECC belie the oft-quoted Indian philosophy that India’s growth automatically percolates down and benefits rural India. Recent developments in the country also indicate increasing rural-urban disparity in the post-liberalization period.

It is a fact that in the post-independence planned development rural India has not only remained neglected but also suffered from resource drain to help develop industrialization and urbanization in the country. However our industrial policies have failed to draw rural youth into employment and thus increasing poverty in rural areas.

In the present critical situation when the rural India has emerged as the saviour of the shattered Indian economy, there is need for re-orienting the development strategy focusing development of rural economy and more particularly the non-farm sector. As our agro-based rural sector holds the promise for food-processing industries but as the latest NSSO (73rd Round) data show that most of these food-processing industries operating in rural areas are own-account enterprises and thus are either stagnating or contracting, there is need for encouraging growth of place-based manufacturing and service sector units in the villages. Boosting rural economy will entail faster recovery and sustained economic growth of the Indian economy.

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