Some corporate leaders have repeatedly highlighted that the rural economy is doing much better than the urban economy in India. In their view, the economic recovery from COVID-19 led slowdown will be led by the rural demand. The rise in sales of tractors, passenger vehicles and consumer staples in rural sector has been cited as clear signs of rural recovery. The data of bumper Rabi crop production and highest ever Kharif sowing is being widely used to support the faster rural recovery argument.
To make an assessment, we visited some rural areas of UP and Rajasthan over last weekend. After visiting over 50 rural clusters and speaking with many people (traders, local administrators, farmers, laborers, etc.) our impression about the situation as follows:
(a) The staple Rabi crop of cereals and sugar cane has been good and prices have been supportive in these two states. However, the fruit and vegetable crops have not been good and caused losses to large number of farmers. The rise in sowing area for Kharif crop is mainly due to return of migrant laborers and good rains in past three months.
(b) The government work under MNREGA, acceleration in construction of road projects, shortage of farm and construction labor has resulted in created significant demand for tractors and farm equipments. The trend may continue for few more years.
(c) Due to paucity of labor, many farmers in UP and Punjab have used direct planting for sowing paddy this time. If the outcome is satisfactory, the labor requirement for paddy cultivation may fall sustainably by 75-80%. The government shall be supportive of this technique as this method is significantly less water intensive. The demand for rice planters and harvesters may rise multifold in coming years at the expense of migrant laborers. This essentially means that while the large farmers will gain materially (higher productivity, lower cost and better prices), the poor laborers will struggle to find employment at the prevailing rates (Rs600-900/day). This augurs well for sale of cars, SUVS, tractors, farm equipments, high quality seeds, premium liquor, etc., for staples etc it may not be a good news.
(d) The migrant laborers are facing a variety of problems in their villages. There is significant rise in family disputes over house and land properties. The children who were born and raised in large cities are finding it difficult to adjust to village life, especially education. Many laborers are willing to come back to cities, but most of them are unlikely to bring their families along. This means persistent pressure on the village civic infrastructure for longer duration than earlier anticipated. Most laborers have outstanding dues to be settled in cities (Rent, DTH bill, Phone Bills, Grocery & Milk bills etc.) Almost none is in a position to pay. So it will be a fresh begining for most of these laborers – new place and may be new work also.
(e) The government has provided decent money under various schemes. The food is available in plenty. The pre COVID-19 ration schemes (Rs 1/kg food grain) is functioning well to provide sufficient foodgrain for subsistence to the below poverty line (BPL) citizens.
(f) The post COVID-19 free food distribution scheme (PMGKY) which is primarily targeted at the daily wage earners and poor who would have lost employment due to lockdown, has not been successful in meeting its target. It is feared that most of the ration released under this scheme may have been misappropriated by the scrupulous politicians and administrators. Many people indicated towards this possibility but were scared of speaking in specifics. Many people highlighted cases of sudden riches in their villages. New cars, tractors, motor cycles were cited as the signs of new riches.
Overall, we got a mixed feeling. It would be prudent to wait for the Kharif harvest to get a clearer picture.