Expectations from the budget: Government may increase expenditure on schemes in rural areas

New Delhi|Global brokerage firm Goldman Sachs believes that the allocation of schemes related to rural areas may increase in this time’s budget. This will include welfare schemes and other schemes. However, in future the growth rate of government expenditure on such schemes may remain lower than the GDP growth rate.

Analysts believe that if this happens, it will improve the income of the village people and expenses will also increase. But along with this there is also a need to increase savings. As the income of rural Indians improves, rural consumption is also likely to increase, but rural development should also accelerate. Savings in rural areas should increase as income increases and the banking sector will make more efforts to expand branches in view of the possibility of increase in deposits. When income improves, people will think about the future of the family, which has scope to increase access to insurance in rural areas.

Priyanka Khandelwal, fund manager at ICICI Prudential AMC, says rural India is an integral part of the growth story as a large section of our working-age population is in this area. 64% of the country’s population lives in villages and accounts for almost half of the economy. In the last decade, many investments have been made by the government to improve the standard of living in rural areas and this has brought many people out of the poverty line. Despite all investments to improve social welfare, rural incomes have not fared well over the years at the aggregate level due to too much reliance on agriculture for employment.

More dependence on agriculture for livelihood
Vikas Anand, registered advisor, Association of Mutual Funds in India (Amfi), says, there has been no significant change in the lives of people employed in non-agricultural jobs in the last ten years. Dependence on agriculture for livelihood was high as agricultural income growth was limited. Urban income growth has been better.
This is why urban India has performed much better in terms of income and consumption growth than rural India.

Better approach to nonagricultural jobs
The outlook for rural India may be different this decade, as the outlook for non-agricultural jobs looks better. The emphasis being placed on increasing India’s manufacturing sector for domestic needs as well as exports has the potential to improve the availability of non-agricultural jobs. Schemes like Ladli Bahna are good signs for rural consumption and/or savings. Rural per capita income is also close to the turning point from which non-food consumption should increase. Companies that focus on serving these customers can benefit from better growth prospects.