Rural India has emerged as the unexpected outrider of the country’s economic regeneration after rainfall for June – the first month of the monsoon season – was recorded at 29% higher than average. This, according to Standard & Poor’s Indian subsidiary Crisil, should help the agricultural sector grow by 2.5% this financial year, in sharp contrast to the country’s overall GDP which could decline by as much as 5% over the same period. The monsoons are both the weathervane and lifeblood of India’s $2.5 trillion economy, spurring farm output and in turn boosting rural spending on items ranging from gold to cars and refrigerators, so the extra rainfall could not have come at a better time
In particular, it has also given a welcome boost to motorbike sales. Earlier this month Hero Motocorp, formerly Hero Honda and the country’s largest manufacturer of two-wheel vehicles saw June sales leap by 90% from January levels and almost exactly four times those the company recorded in May. While CEO Pawan Munja believes that part of this uptick, which has also been enjoyed by other domestic motorbike and scooter manufacturers including HMSI, was partly attributable to consumers switching from public transport to a form of transport that facilitated social distancing, it will also raise hopes that the regeneration of rural India is beginning to pick up speed.
There is a lot riding on those hopes and Prime Minister Modi sees the economic development of rural India’s approximately 650,000 villages as key to his goal of growing the country into a five-trillion-dollar economy. In December the Minister for Rural Development Panchayati Raj Shri Narendra Singh Tomar reiterated that the imbalance between urban and rural India had to be eliminated; that its villages had to move towards self-sufficiency; and that the agricultural sector had to become more profitable.
The Hindi for self-reliant is Aatmanirbharm and it is no coincidence that was also the slogan Modi used in May to launch a $260bn economic rescue programme designed to cushion the devastating effects of the pandemic. Both the agricultural sector and rural India as a whole featured heavily in the programme which include a series of initiative ranging from job creation in forest management and wildlife protection for some of India’s 194 million tribal population to emergency funding for its army of small and subsistence arable farmers.
Modi also took the opportunity to address some structural issues as well, and announced that his administration would start work on a long-term programme of agriculture marketing reforms, particularly on the formulation of a central law whose objective will be to widen Indian armers’ choice sales channels and to create an e-trading framework. The potential to digitalize India’s countryside has already prompted Facebook to invest in telecoms provider Jio; and , according to a new report rural internet users now outnumber their urban counterparts for the first time.) Modi now also intends to set up a legal framework to enable farmers to engage with processors, aggregators, large retailers, and exporters ‘in a fair and transparent manner.’
In a classic example of the law of unintended consequence the pandemic could see India register its first monthly surplus fo 18 years this June. Initial data suggests that the pace of contraction of exports is estimated to have only slowed down by 12%, while imports have fallen almost 49% during the month. If correct this exports (principally of iron ore, oil seeds, rice, chemicals and pharmaceuticals) are expected to come in at $21.9bn, compared to the total for imports (gold, precious stones, silver, transport equipment and petroleum) of $21.1bn.