[ccebook.cn]The World in 2010

Asia
An imperfect storm
Nov 13th 2009
Thanks partly to the monsoon, manufacturing will overtake agriculture for the first time in India
From the village of Vijay Pura in the Indian state of Rajasthan, the global financial crisis seems remote. The
downturn is something people here read about in the newspapers, according to Dhanna Singh, a member of
the Mazdoor Kisan Shakti Sangathan (MKSS), a union of activists and farmers. The villages have welcomed
back migrant workers from neighbouring states, where people no longer find work twisting steel in Mumbai or
polishing diamonds in Surat. But, by and large, India’s rural poor were protected from the crisis by the same
things that make them poor. If you never had secure employment or many financial assets, you cannot lose
them to the crisis.
In Rajasthan, this resilience is also the result of government policy. The National Rural Employment Guarantee
Act (NREGA), extended to every rural district in April 2008, is supposed to offer 100 days of work a year, at
the minimum wage, to every rural household that needs it. Rajasthan, a parched state with a long history of
drought-relief works, comes closer to fulfilling that promise than anywhere else, providing 68 days of work on
average in the year to March 2008, according to a survey published in Frontline, an Indian newsweekly. Vijay
Pura is cross-hatched with hard-packed roads built by people on the act’s payroll. Thanks to the roll-out of the
NREGA and a hike in the minimum wage, “People here are feeling a sense of security for the first time,” says
Shankar Singh of the MKSS.
The strength of rural demand is one reason why India escaped from the crisis so lightly. Sales of many “fastmoving”
consumer goods, such as shampoo and toothpaste, are now growing faster in the villages than in the
cities. Rural India’s purchases of chyawanprash, an ayurvedic paste that eases digestion and bolsters the
immune system, outpaced urban India’s by over six percentage points in the second quarter. And Maruti
Suzuki, India’s biggest carmaker, more than doubled its sales in rural areas in the year to March 2009.
But, having weathered the financial crisis, rural India must now weather the weather.
The monsoon rains, which feed India’s unirrigated farmland, have been fickle,
inflicting drought on almost half of India’s districts, followed by floods in some areas
as the monsoon departed. In a worst-case scenario, India’s agricultural output could
shrink by up to 7% in the fiscal year ending in March 2010, according to Citigroup.
That would drag India’s GDP growth down to 5.2%, slower than in the thick of the
-53-
India’s economy
is now on the
cusp of an
historic transition