India is on the cusp of transformation, and the next wave of economic growth is set to begin from villages, which Mahatma Gandhi considered the soul of India. To achieve this goal, the government's effective programs will improve the socio-economic conditions of people living in rural areas and enhance their quality of life. Investment in the rural economy will shape India's growth story over the next two decades and also provide an attractive opportunity for investors.
Growth Foundation
64% of the country's population lives in villages and contributes 44% to the gross domestic product (GDP). This imbalance is gradually reducing, thanks to the concerted efforts of the government. These efforts include building 7.2 lakh kilometers of rural roads since 2000, construction of 2.1 crore houses under the Pradhan Mantri Awas Yojana, 100% rural electrification, and a 73% literacy rate.
Better connectivity, access to higher education, and less dependence on agriculture are changing the economic landscape of rural India. The contribution of agriculture to the Gross Value Added (GVA) of the rural sector has declined from 56% in FY1994 to 40% in FY22. At the same time, the contribution of non-agricultural activities such as manufacturing, service, and construction has increased from 44% to 60% in the same period. This change indicates a gradual distancing from agriculture, which currently accounts for only 16% of the national GDP despite employing 41.5% of the population.
The next wave: Manufacturing and service sectors
The economic revival in rural areas is driven by a wide range of opportunities. Unlike traditional rural-centric industries such as tractors and consumer goods, this wave is spreading to sectors such as banking, passenger cars, and consumer durables. Rural India is fast becoming the engine of economic growth and is set to redefine the country's growth story. Several government programs aimed at promoting rural industrialization are paving the way for sustainable development. This change opens up new opportunities for India, especially in rural areas where the reach of major sectors is still limited.
Investment Opportunity
Investors interested in taking advantage of the rural development opportunity can consider ICICI Prudential Rural Opportunities Fund. This open-ended equity scheme invests in sectors and companies that are driving and benefiting the development of rural India. The New Fund Offer (NFO) is available from January 9 to January 23, 2025.
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