A healthier rural economy for Modi 3.0

Agriculture sector GVA increase was 1.4 percent in FY24 against 4.7 percent in 2022-23.

A slowdown in the rural sector or a K shaped recovery is being cited as one of the key reasons for the loss of seats the BJP suffered in Uttar Pradesh. At the national level, the BJP lost 63 seats from its 2019 tally.

Agricultural Gross Value Added (GVA) growth slowed to 1.4 percent in FY24 from 4.7 percent in 2022-23, indicating pain in rural areas.

But the government is expecting the scenario to improve in the current year owing to a better monsoon, consumption, credit growth and pickup in private capital formation. This drives both employment and investment, a source noted, adding that the data does not indicate any systemic risk.

“The government anticipates higher agricultural growth in FY25 on expectations of an above-normal monsoon, better than last year, with spatial distribution,” a source in the government said.

“The appetite of banks to lend to different sectors of the economy and willingness to borrow are two important drivers apart from public investment. Private sector capital formation has picked up. We are seeing a steady pickup and the momentum is sustained. The private sector capital formation will be an important driver of both employment and investment growth in the coming years,” he added.

Year-on-year growth in the March 2024 quarter was driven by gross capital formation, which contributed 36.9 percent of the total growth.

Until now the credit data of Self Help Groups (SHGs), Micro finance Institutions, National Bank For Agriculture And Rural Development (NABARD), and the CIBIL score on small loans does not indicate any systemic risk in household finances, he added.

NABARD provides credit to agriculture, small-scale industries and other allied economic activities in rural areas.

However, the average private consumption growth rate slowed to 4 percent in 2023-24. This is much below the 11.7 percent growth rate of average private consumption in 2021-22 and 6.9 percent in 2022-23, averaging at 9.2 percent for the two years.

“If the sectors were stagnant it would be a cause for concern. In FY25, with a better monsoon, rural income picking up, and faster growth in private consumption, the momentum is expected to improve,” he said.

Though the Reserve Bank of India’s consumer confidence survey rose by 2.1 points in April to 125.2, its highest level since mid-2019, it does not include rural parts of the country, he added.