Syllabus GS-II & V: Inclusive Growth

Why in the news?

Recently rural India’s economic performance is accelerating, driven by strong agricultural growth, rising consumption, expanding credit availability, and proactive government policies. With 64% of India’s population living in rural areas, experts now believe that India’s next trillion-dollar growth push may come from its villages, not its metros.

Rural India: The Growth Engine of the Future

Rural India is not just the cultural heart of the country—it is a critical economic pillar. The rural economy contributes significantly to:

• National output,
  
• Employment, and
  
• Consumption demand.
  

Key facts:

• Agriculture contributes 18% of India’s GDP.
  
• It employs 50% of the workforce, making it the largest employer.
  
• Rural consumption is a ₹40 lakh crore market, growing at 12–15% annually.
  
• Rising aspirations and entrepreneurial behaviour are reshaping rural markets.
  

This scale and depth mean that if rural India grows sustainably, India grows sustainably.

Agricultural Strength: The Foundation of Rural Prosperity

Record farm outputs in FY25

Strong monsoons, timely agri-inputs, and better soil moisture supported high production:

• Wheat: 112.5 million tonnes (↑10.5%)
  
• Mustard: 9.3 million tonnes (↑12.1%)
  
• Rice: 116.4 million tonnes (↑8.5%)
  
• Soybean: 12.8 million tonnes (↑15.6%)
  

Healthy Kharif and Rabi cycles have increased liquidity in rural markets and strengthened purchasing power.

Allied sectors driving growth

Allied activities—dairy, fisheries, poultry—are becoming powerful economic stabilisers:

• Dairy: 198.4 million tonnes of milk (↑6.2%)
  
• Poultry: Broiler output 4.5 million tonnes (↑9.5%)
  
• Fisheries: Expanded due to better cold-chain infrastructure
  

These industries cushion farmers from climatic risks and generate non-farm income.

Expanding Rural Credit: Fuel for Local Investment

Financial institutions are expanding into commodity clusters, improving credit access.

Key indicators:

• Agricultural credit disbursement: ₹12.9 lakh crore (↑10.3%)
  
• Farmers insured under PMFBY: 5.5 crore (↑15.6%)
  

Cluster-based lending boosts:

• Market linkages
  
• Input supply
  
• Storage and logistics
  
• Agri-startups
  

This credit penetration allows farmers to upgrade technology, diversify cropping, and invest in value addition.

Government Policies Strengthening Rural Infrastructure

Major schemes transforming rural growth:

Agriculture Infrastructure Fund (AIF)

• ₹1 lakh crore corpus
  
• Supports post-harvest infrastructure, cold storage, grading, warehousing
  
• Targets 10,000+ projects
  

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

• Guarantees ₹1.4 lakh crore loans
  
• Supports FPOs, micro-enterprises and food processors
  

PMFME Scheme

• Formalises micro food processing units
  
• Supported over 2,500 enterprises
  

PLI Scheme for Food Processing

• Attracted ₹10,000 crore investment
  

PM-KISAN

• ₹6,000 annual direct income support to 10+ crore farmers
  

These initiatives reduce risks, promote investment, and enhance rural productivity.

Emerging Challenges

Despite the growth momentum, risks remain:

• Erratic monsoons and extreme weather
  
• Global commodity volatility (oils, pulses)
  
• Rising input costs:
  
  • Fertilisers: ↑15.6%
    
  • Fuel: ↑20.5%
    
• Logistics inefficiencies and fragmented value chains
  

These challenges underline the need for climate-resilient agriculture, storage facilities, and market integration.

Way Forward

Rural India can unlock the next trillion dollars by:

• Strengthening value chains from farm to market
  
• Scaling food processing and agro-industries
  
• Expanding digital access, e-commerce and fintech
  
• Encouraging non-farm rural enterprises
  
• Building climate-smart agriculture
  
• Improving infrastructure under schemes like PMGSY, AIF, and Digital India
  

With expected 8–9% growth in FY26, food and agriculture will remain the backbone of the rural growth story.

Vision 2047 and rural power

India’s aspiration to become a $35 trillion economy by 2047 cannot be realised without an empowered and productive rural sector. The villages of India hold the next wave of economic expansion, driven by rising incomes, better technology, and structural reforms.

Key Terms Explained

• Cluster-based lending: Banks focusing on commodity-specific regions for targeted credit.
  
• Value chain formalisation: Integrating farmers into organised markets with storage, processing and transport.
  
• Agri-infrastructure: Post-harvest assets like warehouses, cold storage, grading centres.
  
• Allied sectors: Non-crop rural activities such as dairy, poultry and fisheries.
  
• Income support schemes: Government cash transfers for farmer stability (e.g., PM-KISAN).
  

Exam Hook: Key Takeaways

• Rural India contributes significantly to GDP, consumption and employment.
  
• Strong farm output + allied sector growth + credit expansion = rising rural prosperity.
  
• Flagship schemes like AIF, PM-KISAN, PMFME, PMFBY and CGTMSE are driving structural transformation.
  
• Rural India’s growth is essential for achieving India’s $35 trillion economy goal.
  

Mains Question:

“Discuss how rural India can become the main driver of India’s next phase of economic growth. Highlight the key sectors, policy interventions and challenges involved.”

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