Worst is behind, India's rural sector demand set to rebound, says Morgan Stanley

Indias rural sector has weathered the Covid19 pandemic and the demand in the sector is poised to rebound assisted by a wider reopening of the economy and improved labour market conditions said global investment firm Morgan StanleyHighfrequency data suggests that overall economic activity has been normalizing over the past three months after remaining sluggish in the trailing 12 months Our consolidated rural activity tracker shows a pickup in YoY terms over the last 34 months the investment firm said in a report titled Rural India Recovery Mode On authored by economists Upasana Chachra and Bani GambhirThe report said the improvement has been led by a lower unemployment rate in rural areas recovering twowheeler sales and increasing growth of credit to the agriculture sectorAlso read IMF dims outlook for 2023 global economy amid Ukraine warWe believe that the key benefit will flow through the second round impact of the broader opening up of the economy ie as employment rises in the informal sector and more employment opportunities emerge in the semiskilled space which will help the overall income levels of rural households it saidPer capita income for urban India is more than double that in rural India thus higher urban incomes and increased migration to urban areas due to normalized activity levels will also help to increase transfers from urban to rural India the report addedFurthermore it said that government spending directed towards rural areas continues to track at 33 per cent of GDP against the prepandemic trend of 22 per centGovernment policy measures such as the focus on infra spending and increasing agriculture support will help to improve the structural outlook the report saidThe resilient agricultural growth and government support measures meant that Indias rural economy could withstand the initial impact of the COVID pandemic fairly well Indeed while Indias GDP contracted by 66 per cent in FY2021 agriculture growth the mainstay of the rural economy grew by 33 per centIt said progress has already been made in physical infrastructure connectivity and digital infrastructure and it expects Indian policymakers to continue to focus on boosting productivity across the rural economyThe report mentions how the Indian government took several steps to support the rural economy throughout the pandemic mainly through measures such as extending the free food program increasing the allocation to the National Rural Employment Guarantee Program and providing liquiditycredit supportThe rural economy accounts for approximately 47 per cent of Indias GDP and twothirds of its total populationFurther the report said weakness in rice sowing is a concernThe first advanced estimates show rice production is likely to be 68 million tonne lower than in 2021We will continue to monitor the governments measures to regulate the supply and demand balance in this area through procurement and other actionsSeparately the water level in key reservoirs is at 108 per cent of the 2021 level which the report said is likely to support the winter Rabi cropping seasonThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever