Rural economy driving India’s growth, govt capex in infra will stimulate it: Report

NEW DELHI: The rural economy in India has emerged as a significant driver of economic growth, outpacing urban areas, largely due to increased government spending in the recent quarters, highlighted a report by Anand Rathi, a financial service company.

“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,” said the report.

For the coming months, the report stated that the growth trend in the rural economy is expected to continue, although a moderation in growth may occur. It also added that the favourable monsoon conditions and improved sowing data are anticipated to sustain the upward trajectory in rural demand, providing a buffer against potential economic uncertainties.

“We expect this growth to moderate following the elections, favourable monsoon conditions and improved sowing data should sustain the upward trend in rural demand”, the report said. The report also highlighted that the government’s ambitious capital expenditure plans, amounting to Rs 11.1 trillion, are expected to stimulate infrastructure development, further enhancing rural economic prospects

The rural economy plays a crucial role in the development of the country because a majority of the population still resides in rural areas. As per the Economic Survey of 2022-2023 around 65 per cent of India’s population lived in rural areas in 2021. The report also highlighted that India stands out among emerging economies due to its strong GDP growth.

Last year, India grew by more than 8 per cent, and the RBI expects a 7.2 per cent growth rate for FY25. The financial outlook is positive, with efforts to cut the fiscal deficit to 4.5 per cent.

The report also noted that India’s credit rating may improve because of the strong tax revenue and a large dividend from the RBI which will lead to a lower fiscal deficit than expected.

“The fiscal outlook appears promising, with continued focus on reducing the fiscal deficit toward the 4.5 per cent target. Strong tax collections and a substantial RBI dividend may enable the fiscal deficit to come in lower than expected, which could potentially lead to an improved sovereign rating”, said the report. (ANI)