112 rural districts representing a population of 291 million have already crossed the threshold of per capita income of $2,000
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NEW DELHI — Rural India is transitioning swiftly from an agri-centric economy to a services-led economy, and 112 rural districts representing a population of 291 million have already crossed the threshold of per capita income of $2,000, according to a report released on Monday.
This pool of wealthy individuals is expected to drive sustained demand for discretionary products and services, said the report titled "Rural India - Shifting economic foundations" by HDFC Securities.
In the past few quarters, rural India has been shouldering the responsibility of consumption growth in the country while urban mass consumption remained soft, impacted adversely by persistent inflation.
Against this backdrop, the report is a bottom-up analysis of 250 rural districts across eight key Indian states, representing 72 per cent of rural India's GDP (INR 109 lakh crore).
"Maharashtra, Tamil Nadu, Kerala and Andhra Pradesh are driving the growth, supported by the burgeoning services sector. Uttar Pradesh's per capita income was low compared to peer states, but growth was stronger," the report noted.
Services is the fastest-growing sector with an 8.8 per cent compound annual growth rate (CAGR), led by financial services (9.1 per cent), trade and hotels (9.8 per cent), and real estate (8.3 per cent).
Industry is stable 7.1 per cent CAGR, supported by strong performance in mining (13.5 per cent) and construction (8.7 per cent).
According to the HDFC Securities report, on the states front, Uttar Pradesh (8.1 per cent CAGR), Maharashtra (7.7 per cent CAGR) and Tamil Nadu (7.6 per cent CAGR) have led the overall real growth of rural India, while other states also remained healthy with 6-7 per cent real growth rates.
Rajasthan (6.6 per cent CAGR), Maharashtra (7.7 per cent CAGR), and Tamil Nadu (7.6 per cent CAGR) have witnessed encouraging improvements as their real growth rates were subdued at 3.7 per cent, 5.6 per cent, and 6.1 per cent, respectively, in the pre-Covid period (FY16-FY19).
Rural Uttar Pradesh has grown at 8.1 per cent real CAGR during FY22-FY25, 120 bps ahead of the overall state growth. Growth has been driven by the industry sector (10.6 per cent real CAGR during FY22-FY25), led by construction and mining, contributing 44 per cent-13 per cent to the sector and growing at 12 per cent-35 per cent real CAGR, the report noted.