Rural economy driving India’s economic growth, capex by govt can bolster it further: Report

The rural sector of India is the driver of the country’s economic growth, news agency ANI reported on August 16, citing a study conducted by financial services company Anand Rathi. The rural economy has left the urban areas behind, aided by the government’s increased investment in recent quarters.

"Rural India continues to outpace urban areas in growth, largely due to a significant rise in government spending in rural regions in the last quarter," the study was quoted as saying.

According to the report, the growth trend in the rural areas is expected to continue in the next few months, although with some moderation. It added that favourable weather conditions and improved sowing data are going to support the growth of the rural economy and will act as a buffer in case of potential economic ups and downs.

It further highlighted the capital expenditure plans of the government amounting to ₹11.1 trillion can stimulate infrastructure development and enhance future prospects for the rural economy.

Notably, the rural economy plays an important role in the overall development of the country as the majority of the population lives in rural areas. As per the Economic Survey of 2022-2023, approximately 65% of the population of India lived in the rural part of the country in 2021.

Meanwhile, the study also noted that India stands out among the other developing nations due to its strong GDP growth. The country’s real GDP grew more than 8% in 2023-24, and the RBI is expecting a growth rate of 7.2% for FY25.

The report also said that India’s credit rate may become better, aided by the revenues from tax and large amounts of funds infused by the RBI. This can lead to a sharper decrease in the fiscal deficit than expected.