Boosted by the opening of new zero-balance savings accounts under the Pradhan Mantri Jan Dhan Yojana, consumption demand from the rural sector, with about 70% of India’s poulation, is likely to surge in 2015-16.
Account holders under the scheme will not only be eligible for loans after six months, but subsidy amounts from other govt schemes will also be directly transferred to these accounts. This will give a fillip to rural activity and demand, which in turn will help the economy grow.
The government may target a growth rate of 7.8-8% for 2015-16, a senior government official said.
“It (opening of bank accounts) does have the potential to perk up rural activity and demand, and a regular monsoon spell would supplement this. However, overall economic activities would also have to improve,” DK Joshi, chief economic adviser, Crisil, told Hindustan Times.
Over 115 million bank accounts have been opened under the scheme, according to official reports.
According to an internal research by the State Bank of India, these new savings accounts are likely to make rural discretionary spending jump up.
The increase in rural wages in 2014-15 has been slow. This is especially after lower spendings on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) by the government, and a narrower increase of the minimum support prices (MSP) of agricultural products. MSP is an intervention by the government to insure agricultural producers against any sharp fall in farm prices. Official sources said the government was watching the sector with a keen eye to fuel the rural economy.
A few years ago, when urban demand remained flat, it was the rural sector which helped in pushing the growth rate.