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India’s growth this year depends on its rural economy

India's poverty level diminishes

India is betting on its hinterland and rural economy this year for pushing growth even as thousands of migrant workers have returned to their native villages. While the surplus labor force could put pressure on the rural economy, normal or above normal monsoon that is expected this year.

Amendment to the six-decade old Essential Commodities Act, if carried out properly, would allow farmers to get better prices for their produce. This will be a big boost to the rural economy. This could lift farm income, at a time when urban India is reeling under the acute financial pressure due to the nationwide lockdown. Growth in the agriculture sector could be over 3 per cent.

Earlier this week, the Narendra Modi government announced to amend the Act which, among other things, will also lead to removal of cereals, pulses, onions, potatoes, oilseeds and edible oils, onion and potatoes from the essential commodities’ list. “This reform measure could prove to be a game changer and push growth in the rural sector,” an analyst said.

Share of the agriculture sector in Indian economy is 17 per cent—higher than the manufacturing sector.

Finance Minister Nirmala Sitharaman last month, as part of the Rs-20 lakh crore stimulus package, announced an additional Rs 40,000 crore to boost the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). In the Budget, the Minister had allocated Rs 61,000 crore towards MGNREGA. Besides, Sitharaman also said that Rs 1 lakh crore would be spent on an Agri Infrastructure Fund for farm gate infrastructure for farmers.

“The Centre has taken several steps to boost rural economy, which includes the agriculture sector. While this year most sectors are likely to remain under stress due to the lockdown, the agriculture sector is expected to outperform. Along with this, the increased MGNREGA allocation would ensure that there is an increased level of employment in the rural areas compared to the other years,” the analyst told IN.

A higher income in the rural areas would also give some push to consumption..