The Urban- Rural Divide: How Sustainable is it to Maintain the Indian Growth Story

Dr. Rajesh Panda


India’s two diverse economies, the rural and the urban, are seemingly increasingly growing apart. However, there are two diverge notions, one is that the growth not only has been skewed towards urban India but also has been gained at the expense of the countryside, while the other says urban expenditure is associated with increase in rural nonfarm employment. Despite different views data clearly show that the urban India has gone far ahead of the rural India creating a class divide. The marginal propensity to consume is less for the rich compared to the poor. Though the income of the urban rich is increasing, the rich will be spending less as a proportion of their income and the spending of the poor will be constrained by their earnings. With the disparity increasing between two classes of citizens, it will be difficult for India to maintain its growth story for long as it will lead to a reduction in the growth rate of national consumption. The much discussed demographic dividend can turn to a social liability in the absence adequate education, vocational training and employment opportunities in the rural areas. This necessitates a well defined public private partnership model for rural employment creation. A rich and well trained workforce in rural India can be a source of employment to the corporate world, a well off rural India will increase their consumption leading to the growth of the corporate world. This will reduce the class divide, stop migration, and help national output grow.

Key Words: Urban, Rural, Inclusive Growth, Marginal Propensity to Consume, Demographic Dividend

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