Dear Readers,
Early morning as a biting cold settles over the land, people are stirred from their sleep by the loud strains of an old Hindi song. As the sound grows louder, they see a young driver, wrapped in a jerkin with a gamcha in his ear, driving a tractor laden with two trolleys of sugarcane. The villagers try to go back to sleep as the distant sputter of the tractor and song fade away, only to be replaced by another tractor. This is a familiar sight during the winter months, as tractors ferry sugarcane to the mills of Western Maharashtra.
Whether it’s the tractor driver, the daily wage earner chopping sugarcane with his bare hands in the cold midnight, or the labourers at the sugar factory, all must work in sync. This is the season of harvest. If they work in winter, they will earn money to survive the summer when work is scarce. The rural economy thrives from season to season, and tractor by tractor.
The current state of the rural economy
Presently, everyone wants a piece of the rural economy. Businesses and finance companies have realised that without rural demand their expansion is incomplete. Recognising its vast potential, many organisations have made rural areas an essential part of their 2025 and beyond vision.
The government, too, has been spending on rural areas wholeheartedly. In fact, it has only increased every year. In the Union Budget for 2024 Rs 2.65, 808 crore was allocated to rural development and Rs 151, 851 crore for agriculture and allied activities.
The finance minister also highlighted the importance of digital registry for land records, building a robust supply chain and planting traditional crops like mustard, sesame, and pigeon pea.
Finance and the rural economy
The government and central bank have kept rural and agriculture on top of their priority list. Every bank has to follow the Reserve Bank’s Priority Sector Lending, which mandates them to lend a certain percentage of their overall lending to rural (Agriculture, micro sector, etc). There are also various other schemes.
According to the Economic Survey of 2024, Regional Rural Banks have added 9.79 crore beneficiaries up to June 2024. 465.42 lakh new Kisan Credit card applications have been sanctioned and more than 104.02 crore beneficiaries registered under various Direct Benefit Transfer (DBT) schemes. Apart from this, the rise of PMJDY, RuPay debit cards, and online payment has been a game changer. But given the scale of the rural economy, it has its limitations.
The real rural challenges
The challenges faced by rural India are multifaceted. From unemployment to reskilling, maintaining the soil quality to dealing with the weather, the list of pain points for rural people is just increasing day by day. Currently, unemployment is the biggest worry, as many of them cannot move to urban areas for jobs, because wages do not cover living expenses in the cities. On the other hand, obtaining credit for setting up small businesses is tough. The government has launched various schemes like Mudra but they have tall walls, which even farmers and dairy owners cannot climb most of the time.
Inflation is another significant challenge, affecting survival in rural areas. The growing issue of climate change only compounds the problem. While consumption data in rural areas is increasing, urban spending remains significantly higher.
India Inc and its rural focus
From earthen to brick houses and bicycles to bikes and then cars, miles by miles the rural economy is advancing. Earlier, where only postmen used to visit, now banking correspondents, agri agents, and even the Bullet bikes of delivery personnel of online shopping e-commerce companies are ubiquitous. A lot has been done, but a lot needs to be done.
India Inc has also directed its focus on rural areas as it believes the rural economy is going to prosper. Not only will the next set of customers come from rural areas but the primary source for raw materials for large India Inc companies also comes from there.
Not just the heavy industries from steel to cement and fertiliser firms, a new wave of businesses is entering the rural market aggressively. Leading retail brands are focusing heavily on opening their outlets at district as well as taluka levels to cater to the aspirational generation, supported by the hospitality and real estate boom.
The stakeholders including the government and industry seem to have realised that without the development of our villages, India cannot become Viksit Bharat, or a developed nation, by 2047.
Hope rules
Hopes riding on the rural economy are higher than ever, and today economists are creating separate dashboards for rural India. But rural areas are not easy to decode. In the same state, there are different regions and different economies. People in the village seek cattle and crop insurance more than health insurance, and save for farming more than their retirement.
As infrastructure gets built and cities connect, my hope is that rural areas should also shape up in a big way. Inequality which is holding back the rural economy should be wiped out. My hope is small businesses get credit and handholding in order to prosper. Banks and finance companies should and must follow cash-flow lending and similar practices to underwrite timely loans. If we use digital and AI appropriately, this could be possible.
What is notable is, according to the Economic Survey, “The rural-urban divide has also declined considerably, as the difference between rural and urban MPCE declined from 83.9 per cent in 2011-12 to 71.2 per cent in 2022-23.”
But let’s not forget every state has a different problem, there are states like Maharashtra that need specific policies for cotton and sugar than what Kerala and Andhra Pradesh need for fisheries.
That’s why they say,
Kos Kos Par Badle Vani
Ghat Ghat Par Pani…
(Every mile brings a change in language, every river bank a change in water.)
As usual, I am adding here the top 5 stories of the week, trust you will find them meaningful.
1.India Inc CFOs’ top resolutions for 2025: Growth, innovation, sustainability and work-life balance
2.Outlook 2025: India’s economic growth may face US policy, fiscal strain headwinds: Experts
3.2025: What can the Indian business world expect?
4.GST Outlook 2025: Tribunals, easing compliance, rate rationalisation expected in New Year
5.GST collection grows 7.3% Y-o-Y in December at Rs 1.77 lakh crore, but slips sequentially
Happy New Year.
Happy Reading,
Amol Dethe,
Editor,
ETCFO
(Editor’s note is a column written by Amol Dethe, Editor, ETCFO. Click here to read more of his articles exploring several buzzing topics)
