India, with over 65% of its population living in the village scenario, technically is a rural economy. Villages form the cornerstone of the nation’s socio-economic framework and perform a lion’s share of economic activity of the country. Out of 1.21 billion Indians, as per the 2011 Census, nearly 833 million live in rural India, over two-thirds of the nation’s population. In spite of the recent urbanization in the country, in spite of numerous cities having been converted into metropolitan towns as the hub of economies, villagers’ contribution towards the Indian GDP, employment, agriculture, and economy of India in general is so dominant and unseparable. Agricultural activities of villages are the most prominent economic activity of villages in India.
Share of nearly 18.3% contribution was provided to the Gross Value Added of India for the year 2022-23, according to the Ministry of Agriculture and Farmers’ Welfare. The agricultural industry, which is working largely in rural India, not only supports over one billion individuals but is also the workplace of nearly 43% of the Indian workforce. Rural India is the bastion of the agriculture-based economy, and marginal and small farmers (with less than 2 hectares) possess 86% of all farmers. Although they possess only 47% of the total agricultural land in the country, their contribution to food production is substantial. Villages have thus been contributing significantly to the food requirements of the nation and offering livelihood opportunities to crores of people. Aside from agriculture-based economy, rural India is now an emerging market and massive production center for most industry sectors. Growing rural manufacturing has been a typical trend.
According to Reserve Bank of India (RBI) estimates, nearly 51% of all Indian manufacturing companies have their business set up in rural areas. They are a chain of micro, small, and medium enterprises (MSMEs) engaged in textiles, handicrafts, agro-processing, pottery, etc. Initiatives like the ‘One District One Product (ODOP)’ and ‘Make in India’ have given power to rural artisans and boosted the non-farm rural economy. According to the Ministry of MSME report, over 11 crore individuals are employed in these units, most of which are located in rural India. These industries diversify the rural economy, reduce the dependence on agriculture, and stabilize the incomes. Rural consumption is also emerging as a new growth driver of Indian economic growth. Surveys conducted by market research company surveys for companies like Nielsen and McKinsey indicate that rural consumption has grown at a compound annual growth rate (CAGR) of 9-10% and surpassing urban consumption in the majority of categories.
FMCG companies have pointed out that nearly 40% of their rural sales. Increased smartphone penetration and higher literacy rates, better road and telecommunications network and availability of data, have empowered rural consumers to be smart buyers. Online retail companies like Flipkart and Amazon have witnessed huge rural customer bases, with supply chain and delivery reaching deep into the interior. Rural infrastructure development has also served as a catalytic agent to the national economy. Programs like Pradhan Mantri Gram Sadak Yojana (PMGSY) have connected over 97% of the target habitations with all-weather roads, enhancing access to markets, health centers, and schools.
The Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) has gone a long way in electrifying over 99% of Indian villages that, in turn, power irrigation pumps, small industries, and schools. Such infrastructure outlays have produced a multiplier effect with the rural-urban migration being held in leash, productivity enhancement, and rural entrepreneurship. Yet another gigantic economic contribution of India’s villages is through the generation of employment by public welfare measures. The Mahatma Gandhi National Rural Employment Guarantee Act launched in 2005 is the world’s largest public works program.
It generated over 2.6 billion person-days of work in the financial year 2022-23, as per official data. Along with acting as a support system for the rural poor, MGNREGA also creates lasting assets such as ponds, roads, and check dams that contribute to helping further enhance farm productivity and rural livelihoods. Income derived from the wage under the scheme has immediate and beneficial impacts on rural consumption and poverty. Rural education and skill formation are starting to become drivers of the economy. ICT has been brought into the villages’ class by Digital India and Skill India, creating new possibilities for employment and digital literacy. More than 95% school enrollment of the villages despite issues with quality and learning problems, as per the 2023 Annual Status of Education Report (ASER).
But the demographic dividend that can be provided by a well-educated rural youth population can also be an economic growth stimulus in the future years. Equipped rural youth with tools and training are rapidly embracing such sectors as BPOs, e-commerce logistics, and digital services, bridging the urban-rural divide gap. Rural sustainable development is another highly economically topical theme. “. Alternative power systems like biogas units, solar photovoltaic devices, and wind power community programs are becoming increasingly popular in rural Indian villages. According to the Ministry of New and Renewable Energy (MNRE), over 2.5 million biogas units and 30 million solar lanterns have been released to village panchayats. They are renewable energy resources, and they reduce the use of fossil fuels, save emissions, and generate green employment. Promotion of organic farming, conservation of water, and management of natural resources have also been extended massive support, particularly by self-help groups and NGOs, constructing a sustainable rural economy in conjunction with environmental objectives.”. Financial inclusion has seen unprecedented growth in rural India over the last decade. Through initiatives like the Pradhan Mantri Jan Dhan Yojana (PMJDY), over 48 crore accounts have been opened of which over 60% are rural and semi-urban.
This has enabled direct benefit transfers (DBTs), reduced leakages, and given financial empowerment to rural households through greater economic independence.
Rural banking centers, electronic wallets, and microfinance outlets have mushroomed, providing even small farmers and artisans access to credit facilities and supporting operations. For the most part, villages play an important role in the Indian economy. Although historical agrarian predominance remains, rural sectors are constantly changing with rising industrial activity, consumption, digital adoption, and entrepreneurship. Rural India’s economic potential, if utilized by concerted policy efforts, infrastructure investments, and human development, can lead to sustainable and inclusive economic growth. The future of the Indian economy is inextricably linked with the success of its villages. This is not a question of social justice but a national development strategy towards building a healthy rural economy.
Prepared by
MD. Mujahid Irfan
Associate Professor,
Department of EEE, SR University, Warangal 506371, Telangana.
