Coronavirus spreading to rural belt may stall growth

Rural India so far has pulled the economy out of a logjam amid Covid-19, but now with infections spreading to the hinterland, the economists are worried even that segment could go sluggish, making India’s slowdown even worse.

The latest analysis by Credit Suisse has warned the pandemic spreading to Tier 3 and Tier 4 cities has the potential to stall growth.

Economists across the spectrum have demanded more stimulus as consumption has showed signs of slowing in rural India too.

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However, Chief Economic Adviser to Modi government on Wednesday said the timing will be right for the government to announce more steps or provide fiscal measures once a vaccine to cure Covid-19 is ready.

“The government is willing to do what’s necessary for boosting consumption, but the timing for this is extremely important,” Krishnamurthy Subramanian said at an industry event here.

He said if the vaccine to cure the pandemic comes in the next few months, the uncertainty will go down.

“Then the time would be very right for a fiscal push, which will generate the demand even for discretionary items.”

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The rural economy constitutes over 45% of India’s gross domestic product and it is not only the agriculture sector but the whole host of other activities such as manufacturing, construction, communication services and public administration, where income per-worker is much higher than agriculture.

The Credit Suisse analysis shows that since the start of Covid-19, rural incomes were boosted by government fiscal support and a robust Rabi harvest. So far the Centre has front-loaded packages in the form of direct cash transfers to women Jan Dhan account holders, more crop procurement, an increase in MGNREGA wages, and support via the Pradhan Mantri Gareeb Kalyan Yojana.