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Rural to the rescue? - The silver lining

On the back of COVID 19, large parts of India came to a grinding halt and are only just beginning to open. Millions of workers in India's urban centers made the hard journey back to their villages, and are expected to stay there atleast until the end of the Kharif season, if not longer.


In today's post, we look to look at the silver lining - understanding how rural demand could shape up, and how we could attain at least a semblance of stability in these trying times.


Agri and labour


While the situation of our rural worker and farmer are anything but ideal, there is a conscious push to attempt the improve the situation. MSP trends have been on a steady rise, increasing between ~5-15% for kharif crops in the FY15-20 period, and between 5-10% for rabi crops in the same period. With a normal monsoon and abundant labour in the fields, agri should do better than most years.


MNREGA, a scheme via which we provide employment to labourers has seen a sharp spike in wage rates, growing between 6.5%-15.5% in different states over the last fiscal. With the government likely to use infrastructure spending as a countercyclical force to battle the pandemic, the workers engaged under this could rise.


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The journey back


There is the most obvious deterrent to go back - the memory of what the workers had to go through in the lack of employment options, and the hardship of the journey to the villages countered by the better employment options in cities under normal circumstances, that led them to make the journey.


The journey back, in all likelihood, would be made when there is slightly better visibility on the employment scenario as well as a slightly improved security environment. States like Uttar Pradesh and Bihar, which see an outflow of workers during good times and an inflow in times of crisis, are likely to push for better job safety for 'their' labour force.


While many have speculated on the journey back to urban centers, a deep understanding on how this would manifest is currently uncertain, with most expecting around the end of the Kharif season. That means at least until the start of Q3 FY21, rural will remain an important demand center for corporate India.


While a slowdown across the board is likely, firms with a well established rural presence could live through the storm a little better. We shall be tracking relevant firms closely to see how the theme plays out and keep our ZappChai readers informed of the same.


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