Has the pandemic helped in reviving rural economy?

The pandemic may have actually led to reverse migration, though the jury is still out on whether there is a positive impact on rural demand and growth.

The number of very small ticket business loans rose 100 percent since the pandemic ( FY’19-21), while retail loans rose 30 percent, data from credit bureau CRIF High Mark shows. This has added to the rural business confidence optimism, indicates an index it computed.

In the three year period between FY’19 and FY’21, covering a significant period over the pandemic, rural India witnesses a 30 per cent growth in the number of retail loans disbursed with the value of loans rising 23 per cent. Average loan size for businesses ended up shrinking though number of business loans rose 100 per cent, and the value of loan shrinking 30 percent during the period.

Overall rural loan disbursements which includes both loans by banks as well as NBFCs rose 16% by value and 32% by volume data with CRIF Highmark showed. The RBI’s latest monetary policy report also points to revival in rural demand after an initial setback after the second wave spread to rural areas.

The credit bureau’s first rural business confidence index in partnership with the Confederation of Indian Industry(CII) showed a score of 63.9 as of October and industry is high on optimism and upbeat on rural economy sentiment.

The survey for Rural Business Confidence Index (RBCI) was conducted during September & October 2021 when impact of covid second wave largely abated, restrictions being withdrawn and vaccination drive accelerated since June’21. With reduction in new cases and severity, business activity was getting improved.

The RBI and the government also announced support measures to help firms cope up with the impact of pandemic. This might have impacted optimism and business sentiments for corporates and MSMEs that participated in the survey, the credit bureau said.

But microfinance loans contracted by value (from Rs. 1.23 Lakh cr in FY 2018-19 to Rs. 1.12 Lakh cr in FY 2020-21) and 19% by volume (from 396 lakhs in FY 2018-19 to 320 lakhs in FY 2020-21) during the same period.

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