Covid-19 : How rural India is Impacted and the road to recovery

What started in December 2019 in Hubei Province of China as a cluster of pneumonia cases has since snowballed into one of the biggest public health and economic crisis in living memory. In fact which of us remembers a time when a billion of our citizens have been confined to their homes for 3 weeks now? These are truly unprecedented times and no business continuity playbook could have prepared us for a scenario like this.

While the impact of the global lockdown is beginning to seep into the social fabric of our cities, a much bigger and more immediate crises is brewing for the over 300 million rural families across India.

For most of our citizens from rural economies who depend on agri / non-agri self-employment generating activities, the problem of economic shutdown is a multi-layered one. This is important to understand if we are to build a credible and realistic plan out of this.

How have they been impacted?

Of the triple whammy to hit the Indian rural economy, the first is rather obvious, the shutdown and consequent stay at home for most of the country’s population has affected the demand for products and services across the board. Perhaps surprisingly, the demand for essential goods have also fallen off the cliff and not because consumers want less but because supply chain disruptions are creating bottle necks in an otherwise well-functioning system. At the tail end this has translated into a evisceration of the market access for the large sections of rural population. They simply do not have a large enough market to sell their products to. For producers of perishable goods this is particularly acute as their window to earn is limited by the shelf life of their produce, and its days not weeks before they are faced with a complete decimation of any opportunity to make a living. Remember, unlike the salaried class with predictable cash flows, rural agri income is crop dependent and highly volatile even in the best of times. But it is also important to acknowledge that the problem of market access extends to those rural families that have non agri produce. Weavers in Assam for example who make a weekly income from sale of home woven ‘gamchas’ (traditional cotton towels) in local markets have been confined at home and the local markets have all but disappeared.

Second, and this is much less understood, is the loss of supply access. A majority of non-agri activities require access to high quality and timely access to raw materials and supplies to create their produce. Many products are seasonal and therefore if not made in time, one simply does not have the customers. Supplies and raw materials are in most cases procured through specific government mandated bodies such as NHDC for handloom. With the mandatory lockdown, local distribution centres for supplies and raw materials have become unstaffed leaving rural producers without access to critical building blocks for their regular produce.

Third, panic in financial markets has completed a perfect storm. Most institutions that support the rural underserved with critical access to capital have reacted to the advisory on moratorium of payments through a slew of measures. But a common theme across most, if not all, is a drop in new credit issuance. Imagine being a rural producer being hit at the same time with loss of customers, supplies and working capital. It is soul wrenching.

Understanding how segments of the rural population has been impacted is critical in devising a strategy to bring this segment back up.

How do we come out of this?

The path to normalcy is through intervention of public and private by taking a nuanced approach to every segment. As we have seen, all three of the trinity of disrupting forces have to be addressed if we are to ensure rural economy comes back to its former self.

For government, this means rural markets for demand and supply lines for raw materials have to be restored. Institutional involvement for each specific industry segments is critical and coordination between State/central government policy makers, Rural Development Institutions and last mile execution is key. If the staffer at the yarn distribution centre cannot make it to work because of fear of being ostracized at his village, it wouldn’t matter what strategy we put across, it would fail every single day.

For private enterprises, now is the time to step up to remove inefficiencies that have held us back from taking our place among the most successful nations. Technology intermediation is key. How can we link rural producers to their consumers and supply lines? In fact, now is the time to seize the opportunity to build technology that obviates the middle man in the rural supply chain in perpetuity.

Financial institutions have an even larger role to play. The moratorium on payments is welcome given large sections are without income and would find themselves hard pressed to make repayments on their existing loan obligations. However, this has unfortunately led to a moratorium on credit issue as well. This is flawed. We need a three-fold approach here:

• Extend a low-interest short term loan to eligible micro enterprises to manage liquidity mismatches.
• Be designed for speedy disbursal by deployment and recovery through existing channels (e.g. MSME focused NBFCs) quick- to-implement eligibility criteria, using existing security
• Use philanthropic capital and impact funds to absorb NPAs

Creating the future of rural?

Holistic intervention in rural can set the stage for creating a far more efficient rural ecosystem and remove inefficiencies. How do we use this time to set the path for rural citizens to not only return to normalcy but eventually improve and transform lives?

A few thoughts,

o  Build linkages: Technology powered solutions must create platforms for rural entrepreneurs to procure, sell and understand demand

o  By providing ‘right’ credit: For a long time credit in rural markets has been a one size fits all. But as we have seen, each producer  segment needs customized credit solutions form fitted to their livelihood

o  Need to identify new opportunities across few sectors as we embark on “New Normal”

o  By creating the right support systems for rural families to thrive: Creating the future of rural is a socio-economic exercise where we must create the right social environment as well for rural families to thrive. Healthcare and education are two key areas where we must build the right last mile infrastructure.

?Together, we can turn adversity into opportunity and build towards our vision for a 5 trillion dollar economy where Rural India will continue to play a significant role  by 2024.