Rural Revitalization: The rural road to $5-trillion GDP

Rural revitalization should be driven by promoting agro-industries and linkages between farm and non-farm sectors.

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India is aiming to become a $5-trillion economy by 2024-25. To get there, India needs to grow at 9% per year in real terms from FY20 to FY25. Atmanirbhar Bharat is also one of our aims. To reboot the economy, the government announced a package of ` 20 lakh crore. Rural revitalization is a promising area for achieving the twin objectives of becoming a $5-trillion economy as well as Atmanirbhar Bharat. Rural economy contributes 25-30% to the GDP. Traditionally, agriculture used to be the main source of income and employment in rural areas, but that place is being taken by the non-farm sector. Rural revitalization requires a transformative approach that envisions making rural areas a better place to live and work. We propose five promising areas to revitalize rural areas.

  1. The role of agriculture will continue to be important for achieving food security, increasing income and generating employment opportunities. However, we need to ensure that we promote a modern agriculture that is driven by technology and markets.
  2. Growth in rural areas should be driven by agro-based industrialisation, which may gradually shift to the non-farm sector. It will require investment in post-harvest rural activities, such as agro-processing, packaging, cold chains, cold storage and transport. It will also require creating an enabling and favourable regulatory environment to stimulate private sector investment in rural areas. The latest agri-laws and public investments in terms of the Agriculture Infrastructure Fund are welcome steps. This calls for creating clusters for specific commodities and developing appropriate supply chains. We propose to develop agro-based ‘special economic zones’ in rural areas to leverage economies of scale and increase income and employment opportunities.
  3. A strong linkage between farm and non-farm sectors needs to be developed for augmenting income and creating jobs in rural areas. Farm-sector driven industrialisation may be evolved from production to processing and marketing. Such a linkage will help the farm sector to produce market-driven commodities, reduce transportation costs, receive remunerative prices at farm gate, and minimise farm waste. Amul is an excellent example of farm-led processing, branding and marketing of milk for various dairy products. Such a model should be replicated for other agricultural commodities in different parts of the country. Collectivising farmers through FPOs or farmer interest groups would also offset scale disadvantages for small and marginal farmers and raise bargaining powers to enhance their incomes.
  4. The role of MSMEs will be very critical in developing rural industrialisation. Their share in national gross value added is about 32%. They provide employment to about 111 million workers. The share of MSME-related products in exports was about 48% during 2018-19. The government is gearing to increase their contribution in the gross value added to 50%, and in exports to 75%. It projects to generate jobs for about 150 million workers. Such overwhelming targets will require huge investment to create necessary infrastructure; effective institutions for enabling MSMEs to have access to technologies, finance and markets; and vocational education and skill development in manufacturing and business planning.
  5. The role of rural-urban linkages will be a key driver in rural transformation. Strengthening rural-urban linkages, from farms to small towns to megacities, will benefit rural labour, production, distribution, markets, services, consumption and environmental sustainability. New market opportunities created by growing urban areas and new technologies will promote local, regional and global value chains. Read more

About the authors:

Dr AK Padhee
Director, Country Relations and Business Affairs, ICRISAT

Dr PK Joshi
Former Director, South Asia Office
International Food Policy Research Institute

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