Assess damage to rural economy

The second wave of Covid infections started in cities, just like the first wave. But unlike last year, this year infections have spread into the hinterland, putting the rural economy at risk.

How serious is this risk?

BloombergQuint analyzed the share of rural population in the country’s worst-hit districts and their share of national income to judge which regions are most at risk. However, the extent of the fall in economic activity remains uncertain and difficult to assess.

Success: urban versus rural

Of the 50 worst-hit districts in the second wave, for 26 districts, the rural population accounted for more than half, the analyzed data showed.

For analysis, the most affected districts over a 60-day period during the second wave were identified using publicly available data from Howindialives.

Bengaluru Urban was the worst hit district of the second wave with cumulative positive cases rising from 4.2 lakh to 11.2 lakh between March 25 and May 23. Pune, Mumbai, Nagpur and Thane of Maharashtra ranked among the worst affected districts after Bengaluru for the same period.

The reason why the National Capital Region of Delhi is not included in this list is that it comprises eleven distinct districts. As such, Gurugram, Lucknow and Jaipur were the worst affected districts in North India, with Kolkata and North 24 Parganas seeing the highest increase in the eastern region.

Of the 50 most affected districts, 26 had a rural population above 50%, ranked according to district data from the 2011 census.

The increase in sample size has resulted in a steady increase in rural districts, with 44 of the 75 worst-affected districts comprising a rural population of more than half.

Rural areas were particularly affected in Maharashtra, Kerala and Andhra Pradesh.

According to Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India, the share of rural districts in new cases increased from 45.5% at the end of April 2021 to 48.5% as of May 3, 2021. After still increased to 53.6% new cases, it has now fallen to 51.6% according to the latest data.

However, what is more concerning is the higher number of deaths in rural areas, Ghosh said. While the death rate is 1.3 per 1,000 on average, this figure was found to be higher for the 150 rural districts analyzed by Ghosh. In some rural areas of Chhattisgarh, for example, the death rate is as high as 8 per 1,000, far beyond anyone’s thought, he said.

Economic impact

The 26 districts of the 50 worst affected, with a rural population of more than half, held a share of about 8% of the national GDP, according to an analysis by BloombergQuint. For this analysis, the contribution to national output was calculated using GDP by district at current prices from the 2004-05 base, according to government data.

The 24 districts, with an urban population of more than half of the total, contributed about 14% of the national GDP. This excluded the GDP of Ahmedabad and Surat as official data was not available for the two districts.

While the share of severely affected rural districts is lower than that of urban districts, economists fear that the rural economy may be less resilient due to lower incomes and limited access to financial support.

The government’s share of current health spending in India is only 27.1% and an extremely large 62.4% is borne by households, according to a May 27 report by India Ratings & Research. In rural India in particular, if citizens are forced into debt to meet health expenses, it can be more damaging than other types of household debt, according to the report authored by Sunil Kumar Sinha , Devendra Pant and Amit Jain. .

Eventually, this stress will result in weakened rural demand. Even if a strong monsoon sustains agricultural activity, non-agricultural activities may decline, as most of these activities require high human contact.

The supply of work under the Mahatma Gandhi National Rural Employment Guarantee Scheme plummeted in May, BloombergQuint reported earlier this month.

“The slowdown in non-farm activities and, consequently, non-farm incomes, will have a serious impact on rural demand, since non-farm incomes constitute nearly two-thirds of rural incomes,” the India Ratings report said. The most recent data available on the share of non-agricultural activities in rural areas dates from the 2012 financial year. This shows 60.8% of non-agricultural activities in rural gross value added against 39.2% for agriculture .

The recent slowdown in rural wage growth, after a sharp rise earlier, will further stifle consumer spending.

Average agricultural wage growth from November 2020 to March 2021 fell to 2.9% after reaching 8.5% from April to August 2020. Similarly, wage growth for non-farm activities from November 2020 to March 2021 fell to 5.2% from 9.1% in April. -August 2020, according to India Ratings.

“Rural growth was relatively robust in the first wave. Rural Indians have been exempted from much of the lockdown and have continued to benefit from the production and sale of essential food items to urban Indians,” said Pranjul Bhandari, Chief India Economist at HSBC. But if the spread of the disease in rural India is significant this time around, it could bring another cloud of uncertainty, she said.

About Keneth T. Graves

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