For the first time since economic reforms began two decades ago, consumption in rural India is growing faster than in urban areas, a survey by ratings and research firm CRISIL revealed Wednesday.
Given the large size of India’s rural population, the value of goods and services consumed
has always been greater in rural India, but urban India had narrowed the differential during most of the last decade by growing at a faster pace.
Between 2009-10 and 2011-12, additional spending by rural India was Rs. 3,750 billion, significantly higher than Rs. 2,994 billion by urbanites.
"Underpinning this growth in rural consumption is a strong increase in rural incomes due to rising non-farm employment opportunities and the government’s rural focus through employment generation schemes," Roopa Kudva, managing director of CRISIL, said in a research report.
Growth in rural consumption was fuelled by a rise in household incomes due to greater non-farm job opportunities and government initiated employment generation schemes.
National Sample Survey Organisation (NSSO) data shows that during 2004-05 to 2009-10 rural construction jobs rose by 88 percent, while the number of people employed in agriculture fell from 249 million to 229 million.
In addition, migrants from villages to urban areas who benefitted from job opportunities in infrastructure and construction projects increased remittances to their families in rural India, which boosted consumption.
A notable phenomenon in rural consumption is a shift from necessities to discretionary goods, the study report said.
About one in every two rural households now has a mobile phone. Even in India’s poor states such as Bihar and Orissa, one in three rural households has a mobile phone.
Nearly 42% of rural households owned a television in 2009-10, up from 26% five years earlier.
Similarly, 14% of rural households had a two-wheeler in 2009-10, twice that in 2004-05. For India, a young population, rising income and low penetration of many consumer durables means that rural consumption has the potential to remain an important source of demand.
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