Puzzling State of Rural Economy
Puzzling State of Rural Economy Introduction: The state of India’s rural economy is puzzling. There is enough evidence to support two opposing statements: One, that the rural economy has improved; and, two, that the rural economy is in the doldrums. On the one hand, some indicators are positive- The unemployment rate has been falling while rural wages have been rising. On the other hand, instances of rural distress are rife and rural consumer sentiment has weakened. There has been a surge of demands for farm loan waivers. Four states have already announced waivers worth about 0.5% of national gross domestic product (GDP). Four more are threatening to do the same. What triggered the distress? The large fall in food prices and the resulting shift in the terms of trade (the cost of producing food versus the income derived) to the detriment of rural India triggered the distress. Causes of falling food prices: Immediate cause- The causes of falling food prices are one-tim...