Bharat won't save the day PDF Print E-mail
Friday, 31 August 2012 00:18
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Rural demand grew only because the economy did

With ratings agency Crisil analysing NSS data to show the growth in rural consumption has, for the first time in nearly a quarter century, outpaced urban consumption, the old story of Bharat being in good shape and therefore providing a solid underpinning to demand has got another lease of life. As Crisil points out, between FY10 and FY12, rural consumption expenditure rose R3,75,000 crore as compared to R2,99,400 crore for urban consumption. Even if you use FY10 consumption data, Crisil points out, almost one in every two rural households has a mobile phone, nearly 42% own a television, 14% have a two-wheeler, and so on.

More than the numbers, what’s important is the cause of the growth. While Crisil talks of 27% of rural households having got jobs under MGNREGA, this is misleading since it includes even 5-10 days of employment in a year—once you correct for this, total employment created under MGNREGA doesn’t account for more than 3-5% of all employment. The larger reason is the sharp surge in rural construction—Crisil points out this rose from 16.8 million jobs in FY05 to 31.7 million in FY10.

But rural construction didn’t just rise in a vacuum. While larger procurement prices played a role, higher GDP growth meant development funds available with states, and spent largely in rural areas, rose 17% per annum between FY04 and FY10 as compared to under 9% per annum between FY95 and FY03. So, like it or not, Bharat cannot grow unless India does. That’s the lesson for India’s political class: even populism cannot grow unless the economy does.


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