Despite increasing urbanisation over the past few decades, India continues to be a largely rural country with an estimated 65 percent of its population still based in rural areas. The rural economy which contributes an estimated 46 percent to the national income is still predominantly driven by primary agriculture and production of raw materials. Agriculture provides direct employment to an overwhelming part of the rural population. However, it contributes only around 15-16 percent to the Indian GDP.
With primary agriculture constituting a bulk of the rural economy, India’s aspirations for becoming a 5 trillion dollar economy and doubling farmers’ incomes depend heavily on diversifying the rural economic dynamics. Lack of economic activities beyond agriculture, limited job and entrepreneurial opportunities force thousands of people to migrate from rural areas to urban economic hotspots every year. The COVID-19 induced lockdown and the consequent drop in economic activity led to large reverse migration this year. While many workers have chosen to return back to their urban jobs, many others are still struggling to cope with the COVID induced change.
In such a scenario, it is imperative more than ever before to reimagine the structure of India’s rural economy. Enabling diversification beyond agriculture, promotion of secondary agriculture and generation of new entrepreneurial opportunities can bring about a structural change in the rural economy and create opportunities to absorb the workforce. Introducing value added activities, rather than just cultivation, will also help the rural economy increase its share of contribution in the GDP.
Promote secondary agriculture
India’s farmers are largely engaged in primary agriculture i.e. cultivation of crops with very limited value addition activities conducted post production. This lack of value addition is a major reason for low income of farmers. Estimates suggest that labour productivity in Indian agriculture measured in terms of gross value added (GVA) is less than one third that of China. Secondary agriculture consists of post production activities including logistics, processing and marketing of produce. While primary agricultural activity generates foodgrains and raw materials, post production activities that process the produce and add value to it are considered secondary agriculture. Indian agriculture needs to shift from largely primary production to secondary agriculture if the rural economy is to be transformed and farmers’ incomes improved. Let’s elaborate it with an example. Farmers who currently produce potatoes sell their primary produce in the market on lower costs. However, if they start processing a part of their produce and convert it into potato chips, they will boost economic activity and incomes manifold. All the activities that process, package and market value added agricultural products come under secondary agriculture. Activities such as honey cultivation, composting, poultry and sheep rearing also come under secondary agriculture.
Promoting secondary agriculture will also help diversify the rural economy by engendering a series of micro enterprises and work opportunities. Of course, this requires skill creation and training at the workforce level. Various state and local governments must undertake a series of skill creation drives at district levels, in partnership with private institutions to help generate skill and enterprise for secondary agriculture in India.
Boost micro enterprises
Apart from skilling farmers in value addition, another critical need for transforming the rural economy is the need to support growth of micro enterprises and shift the excessive dependence on agriculture to other more income-generating and sustainable sources of livelihood. In addition to food processing, dairy, livestock, fisheries, warehousing and logistics – all related to agriculture one way or the other – non-agricultural pursuits such as light manufacturing, handicrafts, retail, construction and financial services must be given impetus. With naturopathy and organic products gaining immense popularity across the world in recent years, medicinal herb cultivation and organic farming is another vital commercial activity that can be promoted in rural India.
The rural belt is brimming with opportunities. However, there is need to create skilled and aware entrepreneurs who can exploit those opportunities. Providing business skill training to rural youth and making micro credit easily available are essential elements to enable a rural transformation.
Encourage renewable energy generation
India has set itself the ambitious target of having around 60 percent of its energy from clean sources by 2030. Rural India which has availability of sufficient land and access to abundant sun, wind as well as biomass is ripe ground for setting up multiple renewable energy projects. India needs to promote setting up of renewable energy enterprises in rural India and set the target of meeting rural India’s energy requirements from renewable energy. Promoting setting up of small but numerous energy projects using solar, wind and biomass energy will not only make rural India self-sufficient in energy but will also generate plenty of work opportunities in the hinterland.
Skilling and business training
For the above mentioned ideas to take shape on the ground, there is need for a large skilled workforce as well as youth trained in business skills. In fact, there is need to devise business management programmes and curricula keeping in mind the specific needs and sensitivities of the rural youth who lack access to formal management education. It is important that governments and industry comes together to address this need of imparting business skills and skill training to rural youth.
(Views expressed in the article are author’s own.)