A rural-urban conundrum

Rural India was in the limelight in the week ended December 24. First, rural Gujarat delivered a shock to the BJP by voting largely against the party and reposing faith in an energised Congress. There was a clear divide between urban and rural voters. While the former voted mostly for the BJP, the latter rooted for the Congress. Reportedly, it got 85 per cent of the urban assembly seats and only 37 per cent of the rural seats.

The jolt from the way the campaign unfolded and the final result was big enough to make BJP look less invincible and surprisingly vulnerable in the coming state elections of 2018. Like in Gujarat, the BJP has to protect its turf in Rajasthan and Madhya Pradesh. Given the recent stress in the hinterlands, it faces a rural challenge in Madhya Pradesh.

The Gujarat election results almost immediately led analysts to believe that the next Union Budget would provide copious sops to the farm sector or rural India in general. Most expected the government to raise minimum support prices and allocate more resources towards rural India. Apparently taking a cue, several industry leaders have started talking of great expectations from rural India in 2018.

The government has obliged already by raising import tariffs. On December 22, the central government imposed a 30 per cent duty on import of gram (masoor production and 30 per cent of wheat production in India. The two states along with Karnataka account for 65 per cent of gram production.

During the last week, Karnataka government announced a minimum support price of Rs 6,000 per quintal for tur daal against a market price of Rs 3,500-4,500 per quintal. It also announced a minimum support price for ragi of Rs 2,300 per quintal against the market price of Rs 1,600 per quintal.

Earlier, on November 18, the Centre had raised import duty on crude palm oil from 15 per cent to 30 per cent. It had also raised the import duty on refined palm oil from 25 to 40 per cent. The import tax on crude soya oil was increased to 30 per cent from 17.5 per cent, while on refined soya oil it was raised to 35 per cent from 20 per cent. Madhya Pradesh is the largest soyabean producer in the country.

Political jockeying by activists and government interventions have once again raised the spirits of rural India. Rural household consumer sentiments shot up by 4.6 per cent during the last week. This is in sharp contrast to the 5.7 per cent fall in consumer sentiments of the urban households.

The proportion of rural households that said that their current economic conditions were better than they were a year ago shot up to 31 per cent. This is way above the two-year average of 24 per cent who said that their financial condition at a point in time is better than it was a year ago. On the other hand the proportion of households that said that their economic conditions were worse off than a year ago was 14.9 per cent, which is similar to the average of the last two years. Thus, the proportion of households that were ambivalent has reduced.

In urban areas also, there is a movement away from the ambivalent group. But here, the movement is in the opposite direction towards a feeling of a fall in financial well-being. The proportion of urban households that said that their economic conditions were worse than they were a year ago was 15.2 per cent, which is higher than the average of 11.6 per cent. Such a feeling though is not new to the urban areas. It has been around for several weeks.

As governments try to woo the rural areas because of the overt angst in these areas, it would be good for them to not ignore the urban regions where a silent discontent could upset political charts equally.

Political pressures build up when economic growth slows and job creation is slower than is necessary to feed the aspirations of a young India. These pressures could spur short-term fixes. But we know that active cherry-picking of pressure groups to bestow favour will only make matters worse in the medium term. An acceleration of growth through enhanced job-creating investments is the only sustainable way out for all political parties and for the country.

                                       The author is managing director and CEO, Centre for Monitoring Indian Economy P Ltd



Consumer sentiment indices and unemployment rate are generated from CMIE's Consumer Pyramids survey machinery. The weekly estimates are based on a sample size of about 6,500 households and about 17,000 individuals who are more than 14 years of age. The sample changes every week but repeats after 16 weeks with a scheduled replenishment and enhancement every year. The overall sample size run over a wave of 16 weeks is 158,624 households. The sample design is of multi-stratrification to select primary sampling units and simple random selection of the ultimate sampling units, which are the households.

The Consumer Sentiment index is based on responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household's views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.

The unemployment rate is computed on a current daily basis. A person is considered unemployed if she states that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.

All estimations are made using Thomas Lumley's R package, survey. For full details on methodology, please visit CMIE India Unemployment data and CMIE India Consumer Sentiment.

The creation of these indices and their public dissemination is supported by BSE. University of Michigan is a partner in the creation of the consumer sentiment indices.

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