A road to boost the rural economy through digital and road connectivity

India is a country where a large part of its population lives in rural areas, however, many of them are still isolated from the mainstream, with no benefit from the economic growth of the country.

However, in recent years rural India has seen an increase in the number of Micro, Small and Medium Enterprises (MSMEs) which has further contributed to the overall economic growth of the country.

It is said that almost half of Indian homes are still disconnected from the big cities. Hence, poor road connectivity is one of the main reasons that led rural India to register growth in rural areas.

Speaking about the importance for a country like India to have rural connectivity to boost small businesses and ultimately the rural economy, Suvodeep Rakshit, Vice President and Senior Economist at Kotak Institutional Equities, “ India needs both physical and digital connectivity to boost rural productivity. , increase employment opportunities in rural areas and connect local businesses to urban activity centers. Faster and easier access to cities will ensure higher income opportunities for farmers as well as for manufacturers. In addition, the process of improving rural connectivity would also ensure employment and income opportunities in rural areas. “

The Union government and the Asian Development Bank (AfDB) recently signed a loan of $ 300 million as additional financing to strengthen rural connectivity to grow the rural economy in Maharashtra.

“Loans from multilateral agencies and low-cost loans help increase public infrastructure. While EU and state governments provide for infrastructure expansion in their respective budgets, funding for external agencies is also an important aspect of long-term infrastructure funding. It is also gaining importance. when states have experienced a natural disaster and need additional financing capacity to rebuild affected infrastructure, ”said Rakshit.

Additional funding for the ongoing Maharashtra Rural Connectivity Improvement Project will improve 1,100 additional rural roads and 230 bridges for a total length of 2,900 kilometers (km) in 34 districts. The ongoing project with funding of $ 200 million, approved in August 2019, is already improving and maintaining the condition and safety of 2,100 km of rural roads across Maharashtra, the finance ministry said in a statement. hurry.

Rakshit added: “The expansion of public works in the rural economy as well as the improvement of connectivity (digital and physical) with urban / semi-urban centers should be of paramount importance. Existing rural job creation programs that aim to provide a buffer in times of economic downturn need to be strengthened. Post-Covid, these regimes were able to absorb some of the labor shocks that were visible in India. “

Besides road connectivity, rural India also needs digital connectivity, through which it can grow its business.

According to the World Bank, India had 20.95 ATMs per 100,000 adults in 2019, very low compared to other countries. While over 65% of India’s population resides in rural India, rural areas account for only 20% of all ATMs in India.

Speaking about the importance of rural digital connectivity, Sanjeev Kumar, CEO of Spice Money, said: “The COVID-19 pandemic has been a great learning platform for many industries and financial services are part of it. . industry to find their new normal. This event catalyzed the greater adoption of digitization in financial services. The adoption of technology in financial services is only going to increase, especially in a country like India where the current government has pushed hard for the financial inclusion of underserved people. The recent launch of e-RUPI is an excellent validation of the government’s focus on digitizing financial solutions. ”

Rakshit also added that funding constraints are the most important constraints in expanding rural public infrastructure. However, redefining spending priorities at central and state level can help allocate higher budget spending to rural areas. “This may have a multiplier effect with increases in income and productivity. Given the scars caused by Covid on economically weaker sections of the population, creating jobs with steady income streams would help reshape incomes and rural household savings patterns, ”Rakshit said. .

Meanwhile, Kumar said, “The challenge in rural areas is slightly different. There is a lack of basic banking infrastructure. There is still a long way to go before digital banking services are accessible to all marginalized segments. banking infrastructure problems in rural India. One of those areas is the penetration of ATMs in the country. India remains one of the few countries among emerging economies to have low ATM penetration. “

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