The fallout is visible on the ground. Sales of everyday fast-moving consumer goods have noticeably dropped
Pallavi Das
While rising urban demand, stock market surges, and optimistic GDP projections are now the dominant ways to celebrate India’s post-COVID economic recovery, under this optimism is an unfortunate paradox: rural India, home to almost two-thirds of the population, is suffering from a consumption slowdown that threatens the very base of national prosperity. This is not a temporary or cyclical slowdown, but rather a sign of deep structural distress.
According to the Centre for Monitoring the Indian Economy (CMIE), rural unemployment in March 2024 was 7.4% – a stark indication of the suffering in the countryside. Simultaneously, data from the Labour Bureau show that between 2014 and 2022, real rural earnings for agricultural workers grew at a rate of less than 1% per annum. These incomes have not kept pace with inflation, which has eroded purchasing power.
The fallout is visible on the ground. Sales of everyday fast-moving consumer goods (FMCGs) have dropped noticeably. Hindustan Unilever reported a 4% decline in rural sales in Q3 FY24, while Dabur India registered a sharper 6.4% fall. Rural households, facing financial uncertainty, are cutting back even on essential items. Inflation has exacerbated this trend: rural consumer price inflation stood at 5.76% in April 2024, driven by rising food and fuel costs, which further reduces disposable income. Agricultural distress is a key factor.
The erratic monsoon of 2023 led to a 15% drop in kharif crop output. Combined with the rising cost of inputs like fertilizers and diesel, farm profitability has taken a hit, especially for small and marginal farmers. Agriculture still employs over 45% of India’s workforce, yet it contributes less than 18% to GDP — a longstanding imbalance that has worsened post-COVID.
Government support mechanisms too are faltering. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), a crucial fallback for rural households, has seen its budget reduced to ₹60,000 crore in FY2024–25 — significantly lower than pandemic-era levels. In real terms, this marks a sharp decline, even as demand for work under the scheme remains high. Delayed wage payments and fund shortages have further eroded its impact.
Meanwhile, over 60% of rural workers continue to be engaged in informal, insecure jobs, which offer little protection during shocks. The combination of low income, rising costs, and inadequate safety nets is choking rural demand at a time when India needs broad-based consumption to sustain growth.
This should worry policymakers. Rural demand accounts for nearly 36–40% of India’s total consumption and plays a critical stabilizing role during economic downturns. If this engine continues to sputter, the effects will ripple into sectors like manufacturing, retail, and services — undermining the $5 trillion economy target. Reviving rural consumption will require more than token schemes. It demands a robust policy focus, including expanding MGNREGA, improving rural credit access, supporting non-farm enterprises, and investing in rural infrastructure such as irrigation, roads, and internet connectivity. Rural India must not be seen as a beneficiary of growth but as its essential pillar.
India’s growth story cannot be written in metros alone. The rural slowdown is not just an economic issue — it is a social and developmental one. If rural households tighten their belts any further, the consequences will be felt not only in declining GDP figures but in rising inequality, urban migration, and long-term instability. As we chase global growth rankings, we must remember that no nation truly rises when its villages are left behind.
(The writer is a PhD Scholar at the Central University of Gujarat. Views are personal)
