India is a country where a large portion 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 witnessed an increase in micro, small and medium enterprises (MSMEs), which has further contributed to the overall economic growth of the country.
It is said that nearly half of Indian settlements are still not connected to major cities. Hence, poor road connectivity is one of the major reasons that led rural India to fail 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 physical and digital connectivity to boost rural productivity, increase rural employment opportunities, and connect local businesses to urban hubs of activity Faster and easier access to cities and towns will ensure higher income opportunities for farmers as well as manufacturers. Additionally, the process of improving rural connectivity would also ensure rural employment and income opportunities.”
The Union Government and the Asian Development Bank (AfDB) recently signed a $300 million loan as additional financing to boost rural connectivity to increase Maharashtra’s rural economy.
“Loans from multilateral agencies and low-cost loans help increase public infrastructure. As Union and State governments plan infrastructure expansion in their respective budgets, funding from external agencies is also an importance of long-term infrastructure financing. This also becomes important when states have experienced a natural calamity and need additional financing capacity to rebuild the affected infrastructure,” Rakshit said.
The additional funding for the ongoing Maharashtra Rural Connectivity Improvement Project will help improve an additional 1,100 rural roads and 230 bridges over 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: “Expanding public works in the rural economy as well as improving connectivity (digital and physical) with urban/semi-urban centers should be of paramount importance. existing rural jobs that aim to provide a buffer in post-Covid economic downturn needs, these schemes were able to absorb some of the social shocks that were visible in India.
Apart from road connectivity, rural India also needs digital connectivity, through which it can expand its business.
According to the World Bank, India had 20.95 ATMs per 100,000 adults in 2019, which is very low compared to other countries. While more than 65% of India’s population resides in rural India, rural areas account for only 20% of all ATMs in India.
Speaking on 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 is one of them. . industry to find their new normal. This event catalyzed the increased adoption of digitalization in financial services. The adoption of technology in financial services will only increase, especially in a country like India, where the current government has made a major push for the financial inclusion of the underserved. The recent launch of e-RUPI is a great 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, reprioritizing spending at the central and state levels can help allocate higher budget expenditures to rural areas. “This can have a multiplier effect on incomes and improving productivity. Given the scarring of economically weaker sections of the population by Covid, job creation with steady income streams would help reshape incomes and savings patterns of rural households,” 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. However, Fintech companies can address the lack of basic banking infrastructure problems of banking infrastructure in rural India.One such area is the penetration of ATMs in the country.India remains one one of the few countries among emerging economies to have low penetration of ATMs.