As challenges mount for the Indian economy with a sharp 24 per cent year-on-year drop in Q1FY21 GDP growth and the unabated rise in corona cases, there is still hope for the optimists.

This hope stems from the rising strength of India’s rural economy. The often considered weakness of Indian economy because of poor agri-economics, marked by a very high degree of seasonality, has become the economy’s inherent strength during these Covid times.

Agriculture accounts for more than one third of rural income and it is still the most fundamental aspect of the rural economy even through the dependence on agriculture has reduced over the years. Sowing activities have progressed very well for the kharif season with an all India increase of 6 per cent over the last year’s. The solid growth in sowing area and an excellent monsoon season means that the upcoming rabi season will also be a bumper one. This on a record output of 2019-20 agriculture  season means the agri-economy will continue to grow stronger.

Moreover, the government has been supportive to rural economy because of the migrant labour crisis, which means the flow of money into the Indian rural economy has been stronger than ever.

All this bode well for the 65 per cent of India’s population that lives in rural India. The remaining 35 per cent of India’s population is urban and the challenges to the urban economy are significantly higher. However, even among the urban populace, a significant portion of people have rural connect, which has become an advantage in these challenging times.

While the near-term prospects appear good for the rural economy because of good agriculture produce, even the medium-term prospects are brightening. The government is taking measures to address the supply chain inefficiencies. Modifying the APMC Act and allowing farmers to sell their produce as per the market conditions rather than governed by the regulated mechanism will have long-term consequences, as investment in food supply chains will increase and make pricing more predictable and investmement in agriculture a less risky proposition.

The rural play at this juncture seems to be one of the most assured one to bet on in this environment. While the broader factors appear healthy, they are also backed by high frequency indicators. Tractor sales continue to soar. Even September sales have been very strong as the monsoon season comes to an end.