Rural Marketing

Study of
“Impact of COVID 19 on Rural Demand”

Submitted By:
Submitted to: Group 3
Prof. Neha Saini 05. Alok Kumar
06. Amit Kumar Sahu
 To study the impact of COVID-19 on Rural India

Abstract
COVID 19 has impacted life in the most dreaded way possible. “They will go to die there,
where is life”, this quote got very popular when in the initial days the streets got flooded with
migrant labourers. They were marching back to the land from where they had come in search
of better livelihood and job. But this pandemic changed their perception in many ways and they
were now going back to their villages in the most difficult ways possible in search of warmth
and empathy. They were mainly failed by almost everyone for whom they were working. Many
reached homes after walking for several weeks but for many, the fortune had a different story
to tell and they never reached home rather died on the streets, on the railway tracks. The current
study talks about the impact of COVID 19 on the Rural Demand, which was created by these
people only. The globally fast-spreading novel coronavirus disease (COVID-19) is now testing
the skills of all countries to manage its widespread implications on public health. In order to
effectively contain its impacts, a nation-wide temporary lockdown was enforced in India. The
resultant panic buying and stockpiling incidents alongside the spread of misinformation created
a way of food insecurity at the local level. Almost 400 million workers in India within the
informal economy are at the danger of falling deeper into poverty during the crisis. The low
reporting of COVID-19 cases due to low testing will result in community spread. The reverse
migration will create excess burden on the agriculture and rural economy which can end in a
big number of individuals to fall under extreme poverty. COVID-19 will have both short and
long-run effect on the agricultural economy in India. The government economic package
contains majorly long-term measures whereas short-term measures like cash incentive and
wage subsidy should tend many |to avoid wasting to save lots of lots of migrant labourer and
marginal farmers.

Key Words: COVID 19, Rural Demand, Purchasing Power, Migrant labourer, Unemployment

Introduction
Coronavirus disease 2019 (COVID-19) is a respiratory illness caused by the novel coronavirus,
officially referred to as Severe Acute Respiratory Syndrome coronavirus (SARS-COV-2),
which was first detected in China, in December 2019. There is currently no evidence if food is
a likely source or route of transmission of this virus, but it has been reported to originate from
the world-famous Huanan seafood market in Wuhan city. Although COVID-19 is reported to
be not as deadly in comparison to past pandemics such as
Ebola virus disease, SARS and Middle East Respiratory Syndrome (MERS) its high
transmissibility and rapid speed of spread have become a matter of serious concern for
governments around the world. Djalante et al. and Shaw et al. discussed several international
response measures, which are implemented to break the chain of virus transmission such as
reduction in transportation (through all ground, ocean and air means), tightened border
controls, travel bans, lockdowns, advanced surveillance, etc. While the pandemic is still
unfolding, global agencies including WHO, the World Bank, the International Monetary Fund
(IMF), the Food and Agriculture Organization of the United Nations (FAO) and the World
Trade Organization (WTO) have projected its drastic impacts on global economy and food
systems, unless fast measures are taken to contain the spread of infections.

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Even before the outbreak of COVID-19, the global food systems were already at a critical
juncture, as also discussed in the 2020 Global Food Policy Report. As of 2018, more than 820
million people worldwide did not have secure access to food (p. 6). Other widespread concerns
of climate change, natural disasters, high population growth, poverty, malnourishment,
changing consumption patterns, obesity, etc. have also been posing serious challenges for
sustainable development, particularly in fast growing cities of Asia. The sudden emergence of
COVID-19 pandemic has currently overshadowed or rather aggravated the already existing
concerns of food insecurity. According to a recent projection by the United Nations World
Food Programme COVID-19 may aggravate the risks of acute food insecurity for an additional
130 million people by the end of 2020. Thus far, there have not been any major signs of global
food shortages. However, demand-side contractions have recently been witnessed due to the
largescale closure of restaurants and other commercial food services. As most countries are
now under strict lockdowns or in similar situations, Pete tin uncovered that the majority of the
food consumption is presently concentrated at the household level. Further, food prices are also
reported to be increasing in cities around the world, as food supply from rural areas is disrupted
due to the mobility restrictions. Cities have traditionally been dependent on areas outside their
physical boundaries (mostly surrounding rural and peri-urban areas) to meet their food
demands, but the sudden transport restrictions and shortage of manpower have presently
disrupted the urban–rural food supply chains (from harvesting crops to food distribution)
worldwide. While the jobs and livelihoods of food supply chain actors are at significant risk,
the government mandated lockdowns are also found to be influencing the consumer behaviour
towards food along with their food priorities and lifestyles. In a bid to contain the impacts of
COVID-19 at an early stage, the Government of India (GoI) enforced a temporary nation-wide
lockdown (the world’s largest) from 24 March 2020, by confining more than 1.3 billion people
to their homes. Despite the fragile economy, the country’s timely decision was highly
appreciated by global agencies including WHO and IMF, mainly in consideration to their huge
population and limited healthcare capacities. Although comprehensive protection measures
were put in place at various administrative levels, GoI also announced a huge stimulus. The
major findings of the study suggest COVID-19 will have both short and long-run effect on the
rural economy in India. In the short-run, through the excess burden of the health sector, there
would be high mortality and loss of economic welfare (poverty, unemployment, illiteracy etc.).
On the other side, in the long-run through confidence channel, it would affect physical and
human capital. The low reporting of COVID-19 cases due to low testing will result in the
community spread of the novel virus. The reverse migration will create excess pressure on the
agriculture and rural economy which will result in a significant number of people will fall into
abject poverty.

Literature review
COVID-19 was first declared a public health emergency and later a pandemic by the World
Health Organization (WHO). Currently, the spread of the novel virus is in more than 190
countries. There are a national emergency and lockdown in most of countries. Till date, more
than 4 million people across the globe are affected by COVID-19 virus and around 300
thousand people lost their life. The pandemic is not new for India, the Plague (1896 to 1939)
and Spanish flu (1918) in the past caused 12 million deaths in just three months4. So far more

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than 100 thousand cases are reported in India from COVID-19 and more than 3 thousand people
have lost their lives. India’s effort to combat COVID-19 virus has been praised over the globe.
However, the lockdown came on economic cost and cascading impact on all the sections of
society. The coronavirus pandemic has triggered a massive reverse migration from the urban
to rural areas in large parts of the country. Indian roads are flooded hundreds of thousands of
labourers marching back to their villages to find some warmth and empathy.
The central and states government in India under the special economic package, Pradhan
Mantri Garib Kalyan Yojna (PMGKY) scheme etc. tried to take care of the economy and the
poorest among the poor but effective implementation of this scheme poses a big challenge (Jha
2020). The governance related issues are very important in the effective implementation of the
scheme.
Migrant’s workers are the engine of growth from centuries which have been working day and
night for the economic success of any region across the globe. On the other side, they are the
most vulnerable and have no access to any kind of social security. The forced reverse migration
from urban to rural areas will have a significant impact on the demography, society and
economy of rural India. Most of the migrant workers were marginal farmers in the past which
left agriculture and moved to urban areas for better economic opportunities. The forced reverse
migration amid agrarian crisis poses a big threat on people to fall into abject poverty.
A package of 20 lakh crore INR (around 265 billion USD) to lighten the monetary effects of
COVID-19. By and by, the negative ramifications of implemented lockdown in India have
surfaced in type of a genuine financial lull, terrified transient emergency, alarm purchasing,
and so on with around 195 million undernourished individuals, India as of now shares a fourth
of the worldwide craving trouble and furthermore performs ineffectively on markers of kid
squandering, hindering and mortality, according to the Global Hunger Index 2016. In the
lockdown stage, the circumstance is along these lines especially basic in Indian urban areas,
where lion's share of new food gracefully is overwhelmed by the chaotic retail market. The
wide-going ramifications of COVID-19 on nearby food frameworks are yet to be seen
obviously, as not many proof-based investigations have arisen so far. With regards to India,
the media reports have anyway covered a few issues. There is as yet an absence of thorough
scholastic examinations that look at the effects of COVID-19 on food instability. The traveller
workers who returned from the town subsequent to losing their employment didn't had cash to
spend.

Impact of COVID-19 on Indian Economy

The COVID-19 has disrupted the Indian economy apart from posing health hazards.
International Monetary Fund (IMF) has projected India’s real GDP growth to 1.9% (Annual
percentage change) for the ongoing year 2020. As per the Central Statistics Office, India GDP
growth was 3.1% in the fourth quarter of 2019-20. This is due to the current pandemic situation
that has weakened consumer demand and private investments. Index of eight core industries1
(ICI) recorded a terrible fall to the extent of 38.1% during April 2020. This provides an early
snapshot of the output of core industries amidst the lockdown which extended throughout India
for most of April. These industries combined account for approximately two-fifth of overall

1
Core industries include coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity

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industrial production, as measured by the index of industrial production (IIP). Output declined
across all core sectors during April 2020 (Centre for Monitoring Indian Economy, CMIE).

Real GDP growth rate contraction due to COVID-19 in 2020

12
Real GDP growth (Annual % change)

10

0
1980 1985 1990 1995 2000 2005 2010 2015 2020
Year

Source: International Monetary Fund 2020, PwC Analysis

The ‘Black swan event2’ has hit the economy when growth has slowed to the lowest in the
decade3. This has prompted economists and financial institutions to pare India’s growth
projection for 2020-21 closer to 5% from 6% earlier. Goldman Sachs4, an investment banking
company, has projected a 5% decline in GDP for 2020-21 and said that the fall will be deeper
compared to all “recessions” India has ever experienced. As per Fitch solutions5, the
contraction in GDP is on the back of decreasing private consumption which is declining owing
to large scale loss of income. It is also anticipating a reduction in fixed investments as
businesses will choose to cut back on capital expenditures and look for conserving cash.
According to analysts, losses of consumer and investor confidence are the most immediate
signs of contagion. “Covid-19 has added a supply-side dimension to the demand problem that
the Indian economy is already battling. That can have a very toxic impact on the economy. The
real issue is how long it will last," said Pronab Sen, a former chief statistician of India.

2 A black swan is an unpredictable event that is beyond what is normally expected of a situation and has
potentially severe consequences.
3 Black swan event-https://scroll.in/article/960920/does-the-covid-19-pandemic-meet-the-three-level-check-to-

be-termed-a-black-swan-event
4Goldman Sachs- https://www.businesstoday.in/current/economy-politics/indias-gdp-to-contract-68-in-fy21-
due-to-coronavirus-lockdown-sbi-report/story/404996.html
5 Fitch Solutions- https://economictimes.indiatimes.com/news/economy/indicators/fitch-solution-cuts-indias-
fy21-gdp-growth-forecast-to-1-8/articleshow/75244834.cms?from=mdr

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Growth to face slowdown-FY21 growth Projections

Source: The Ministry of Statistics and Programme Implementation, Mint-15 March 2020
5.90%
Note:Fitch
Moody’s and Barclays projections are for FY20 5.40%

6.50%
Financial Insitutuions

Barclays
5.60%

UBS 5.60%
5.10%

OECD 6.20%
5.10%

Moody's 6.60%
5.30%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Year on Year growth %

Earlier Now

Auto Power IT FMCG Healthcare Telecom

0.00%

-5.00% -3%
Percentage change

-10.00%
-9.20%

-15.00%
-16.20% -16%
-20.00% -18.30%

-25.00% -23.10% Market sinks amidst Lockdown

Source: The Ministry of Statistics and Programme Implementation, Mint-15 March 2020
Note: Feb 1 2020 to March 15 2020 data

‘It is the greatest emergency since independence’, said Dr. Raghuram Rajan, Former
Governor of RBI (Reserve Bank of India)
The market has also taken a hit during this phase with the Automobile sector shrinking 23.10%

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and Power sector contracting by a major 18.3%6. The pandemic had its impact on IT
(Information Technology), FMCG (Fast moving consumers goods), Healthcare and Telecom
as well. As per a survey conducted by FICCI (Federation of Indian Chambers of Commerce
& Industry), 53% of Indian businesses have indicated a significant impact on their operations.
The International Labour Organization estimated that COVID-19 will destroy up to 25 million
jobs around the world. United Nations Conference on Trade and Development (UNCTAD) has
added that it will cost the global economy between $1 trillion and $ 2 trillion in the year 2020.
The Centre for Monitoring Indian Economy (CMIE) reported that India had an all-time high
unemployment rate of 26.2% in the month of April 2020. The labour markets are in under equal
stress both in rural and urban areas. The unemployment of rural India was 26.7% against 25.1%
of urban areas. The unemployment rate, however, reduced to 23.5% in the month of May. This
is because as the lockdown eased, people who had left the labour market in April and returned
in May.7

Why this crisis is having an immediate impact on demand?8

The pandemic initially produced a market shock and disrupted the global supply chain. This
contributed to the shutdowns of factories reducing the ability of the country to manufacture
goods and services. There's also had an impact on the demand side. There was panic buying in
the short term which caused excess demand. But, as the lockdown was enforced leading to
layoffs and a reduction in income, demand dropped dramatically.

6
Decline in GDP in core sectors https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=2020-05-
31%2015:54:18&msec=273

Financial ratings and market sinks-https://www.livemint.com/news/india/indian-economy-braces-for-coronavirus-induced-

shock-as-curbs-set-to-pull-down-growth-11584293920159.html.
7
Raghuram Rajan- https://www.ndtv.com/india-news/greatest-emergency-since-independence-rbi-chief-raghuram-rajan-on-
covid-19-2206716
8
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3609973

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The conviction of the consumer is commonly influenced by macroeconomic weakness. The

since a long-time prior run effect of COVID-19 is essentially run from the prosperity, tutoring
and establishment region. Annoyance and mortality will achieve lost compensation and human
life. Likewise, the public power orders and foundation decision will influence both the
guidance and establishment progression which have since a long-time back run result. The
common interest is dependent on the fall of wages and pay which over the long-haul prompts
climb in dejection. Besides these, he mixes intrigue and nimbly daze is the inspiration driving
why the persistent pandemic is a peril to the interest.9
Supply shock10

• Factory shutdowns- There were shutdowns to protect workers from COVID-19 and to
support the guidelines issued by Central and state government for social distancing.
This is a large way disrupted operations and production of goods, especially non-
essentials. As a business continuity plan, many firms have started working from home.
Few Indian companies opened up in May, but they were facing new problems in
logistics, inputs availability and inadequate workers.
• Labour shortage- As per CRISIL, there are 465 million workforces in the country. Out
of which, 415 million are in the informal sector without security benefits. This is the
reason why the lockdown phase was rough for them. The central government started
running trains to enable migrant workers to go to their native places. This has caused a
labour shortage in industrial areas. Labourers in village areas are likely to take longer
time to return to their workplaces. This is because of the welfare schemes they get in
villages.
• Supply chain disruption- Indian firms that are dependent on foreign suppliers are
impacted badly. For example, China provides 80% of the solar panels to the renewable
energy sector. This will pose a significant risk in the short to medium term. Logistics
disturbance, unavailability of alternate source, travel restrictions, excess inventory are
adding to the pain.

• Drying of cash flows- A prolonged shutdown has forced businesses, especially

MSMEs, struggle for working capital. They are incapable of paying salaries now and
are trying to close the operations. The reasons are higher fixed costs, increasing
inventories and lesser cash collections.

Demand shock

9https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3609973
10Factory shutdowns- https://www.livemint.com/news/india/india-opens-factories-after-curbs-but-conditions-
apply-11588622047908.html

Labour shortage- https://economictimes.indiatimes.com/news/company/corporate-trends/after-being-locked-

down-cos-now-set-to-suffer-labour-pain/articleshow/75542263.cms?from=mdr

https://www.livemint.com/news/india/india-is-set-to-feel-labour-pangs-as-it-reopens-for-biz-
11588621432652.html

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• Low discretionary spending- There was excess demand for essentials when the
lockdown was announced. However, it decreased gradually as time progressed. During
the lockdown regular card usage took a dive with leisure shopping in malls as well as
travel came to a halt. In March 2020, Axis Bank and HDFC Bank reported a drop in
average credit card spending of over 25 per cent compared to January and February. In
the month of May, the average daily retail consumption fell 60% compared to the first
half of March.
• Loss in income/ Unemployment- Migrant workers leaving urban centres like Delhi
and Mumbai reinforced the long-standing fears about their jobs leading to
unemployment. As per CMIE, the unemployment rate was 7% which rocketed to 26.2%
in April due to the pandemic. This in turn has given rise to weaker spending and even
lower demand.
• Weaker Sentiments- Consumer confidence has taken a substantial hit with personal
finances in security and allocating capital for the future. Undoubtedly, there is an
anxiety which is leading to this feeling and there is uncertainty throughout. As per the
survey conducted by Reserve Bank of India11, Consumer confidence collapsed in May
2020 amid COVID-19 pandemic.

Decrease in Consumer Confidence Indices during March 2020

160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0

Survey round

CSI FEI

11
https://m.rbi.org.in/Scripts/QuarterlyPublications.aspx?head=Consumer%20Confidence%20Survey
https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/CCSBFCD529C56C443AF8B6A9350E2F9EF7C.PD
F

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Note:

• CSI is Current Situation Index, FEI is Future Expectations Index

• CSI and FEI are indices for measuring consumer sentiments
• CSI/FEI = 100 + Average of Net Responses of (General Economic Situation, Employment
Scenario, Price Level, Household income and Overall Spending)
Source: RBI Consumer confidence survey, May 2020

The figure plots the demand shock against the availability of shock for every industry. The
radius of the circles is proportional to the gross output of the industry.14 Essential industries
haven't any supply shock then lie on the horizontal ‘0’ line. of those industries, sectors like
Utilities and Government experience no demand shock either, since immediate demand for his
or her output is assumed to stay an equivalent. Following the CBO predictions, Health
experiences a rise in demand and consequently lies below the identity line. Transport, on the
opposite hand, experiences a discount in demand and lies well above the identity line. This
reflects the present situation, where trains and buses are running because they're deemed
essential, but they're mostly empty. Non-essential industries like Entertainment, Restaurants,
and Hotels, experience both a requirement reduction (due to consumers seeking to avoid
infection) and a supply reduction (as many workers are unable to perform their activities at
home). Since the demand shock is greater than the availability shock, they lie above the identity
line. Other non-essential industries, like Manufacturing, Mining, and Retail, have supply

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shocks that are larger than their demand shocks and consequently lie below the identity line.

The figure plots the demand shock against the availability of shock for every industry. The
radius of the circles is proportional to the gross output of the industry.14 Essential industries
haven't any supply shock then lie on the horizontal ‘0’ line. of those industries, sectors like
Utilities and Government experience no demand shock either, since immediate demand for his
or her output is assumed to stay an equivalent. Following the CBO predictions, Health
experiences a rise in demand and consequently lies below the identity line. Transport, on the
opposite hand, experiences a discount in demand and lies well above the identity line. This
reflects the present situation, where trains and buses are running because they're deemed
essential, but they're mostly empty. Non-essential industries like Entertainment, Restaurants,
and Hotels, experience both a requirement reduction (due to consumers seeking to avoid
infection) and a supply reduction (as many workers are unable to perform their activities at
home). Since the demand shock is greater than the availability shock, they lie above the identity
line. Other non-essential industries, like Manufacturing, Mining, and Retail, have supply
shocks that are larger than their demand shocks and consequently lie below the identity line 12.

Special focus on Agriculture

The Agri and food supply chain is a very complex network that includes suppliers, customers,
agricultural inputs, processing and storage, transportation and marketing. Disruptions are
minimal as of now, as the food supply has been adequate and markets have so far been stable.
Global cereal stocks are at comfortable levels, and the 2020 outlook is positive for wheat and
other major staple crops. Although less food production of high-value commodities (i.e. fruits
and vegetables) is already likely, due to the lockdowns and disruption in the value chain, these
are not yet noticeable. Challenges in terms of the logistics involving the movement of food

12
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7499761/

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noted at the onset mainly of the restrictions have been mostly solved by mid-April and May.
The pandemic is impacting on the livestock sector due to reduced access to animal feed and
slaughterhouses’ diminished capacity (due to logistical constraints and labour shortages)
similar to what happened in China. Blockages to transport routes are particularly disruptive for
supply chains of fresh food and may also lead to increased levels of food loss and wastage.
There is a special danger to fresh fish and marine products, which are extremely perishable and
thus need to be delivered, handled or preserved within a fairly short period. Transport
restrictions and quarantine measures are likely to impede farmers’ access to markets, curbing
their productive capacities and hindering them from selling their produce. Shortages of labour
could disrupt production and processing of food, notably for labour-intensive industries (e.g.
high-value crops like fruits and vegetables, flowers etc.). The closure of restaurants and street
food outlets removes a key market for many producers and processors that may produce a
temporary glut or trigger upstream production cuts as can be seen in the fish and meat sectors.
In some developing countries, urban supply and demand for fresh produce are both in decline
due to restrictions and aversion behaviour by traders and consumers. Developing countries are
particularly at risk as COVID-19 can lead to a reduction in the labour force, and affect incomes
and livelihoods as well as labour intensive forms of production (agriculture,
fisheries/aquaculture). There is a possibility of a disproportionately larger decline in animal
protein consumption (as a result of fears, not science-based, that animals might be hosts of the
virus, and other higher-value products like fish, fruits and vegetables. These fears can be
particularly true for raw fish products supplied to restaurants and hotels, including small and
medium enterprises. Fear of contagion can translate in reduced visits to food markets, and a
shift in how people buy and consume food - lower restaurant traffic, increased e-commerce
deliveries (as evidenced in China), and a rise in eating at home (Food and Agriculture
Organization, FAO).

Impact on Agricultural workforce

Agriculture employs the largest number of informal workers, almost 4 times the construction
sector. Still, the impact has been low because of its essential nature and support from the central
government. The agriculture sector has maximum self-employed and casual labours that are
seasonal workers. Hence, even if they are impacted, it would be on a short run or a single
season.
Wheat is the largest Rabi crop in India. It accounts for almost 50% of the Rabi area sown. The
major producers of wheat are Uttar Pradesh (30% of total production), Punjab (18-20%) and
Haryana (18-20%). Haryana depends on 0.6 million labourers and Punjab on 1 million
labourers for various harvesting and procurement activities. Bihar sends 80% of these
labourers. There are also labourers arriving from Uttar Pradesh and Rajasthan. As the news of
lockdown broke out, the labourers returned home. Many of them couldn’t reach Haryana and
Punjab and got stuck. This created a labour shortage. To tackle this problem of labour shortage,
Punjab and Haryana government have employed locals under Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA).

Agriculture employs largest number of informal workers

Vulnerability

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The agriculture sector has maximum self-employed and casual labours that are seasonal
workers. Hence, even if they are impacted, it would be on a short run or a single season.
Wheat is the largest Rabi crop in India. It accounts for almost 50% of the Rabi area sown. The
major producers of wheat are Uttar Pradesh (30% of total production), Punjab (18-20%) and
Haryana (18-20%). Haryana depends on 0.6 million labourers and Punjab on 1 million
labourers for various harvesting and procurement activities. Bihar sends 80% of these
labourers. There are also labourers arriving from Uttar Pradesh and Rajasthan. As the news of
lockdown broke out, the labourers returned home. Many of them couldn’t reach Haryana and
Punjab and got stuck. This created a labour shortage. To tackle this problem of labour shortage,
Punjab and Haryana government have employed locals under Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA). This year, Telangana is expecting bumper paddy
harvests as the acreage has been more than 60% in the state. But, due to a labour shortage, the
government is planning to harvest with 14,800 harvesters 13.
Through a primary survey, we got a ground level clarity on the topic.

The sample population has the demographic distribution of rural and semi-rural background.

13
CRISIL research

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Age

4% 7% Under 20
12%
11%
21-30
31-40
41-50
24%
51-60
42%
above 60

The population comprised of people from all the age group ranging from under 20 years to 60
years or more. These are the people who have faced the impact of COVID directly or indirectly.
They belong to the rural and semi-rural background of state Bihar, Odisha, and Madhya
Pradesh.

Distance from Village

30% 27% 28%

25%
19%
20%

15% 12%
10%
6%
4% 4%
5%

0%
0-50 km 51-150 km 151-350 351-550 km 551-750 km 751-1000 km 1000+ km

Distance from Village

Most of the population move and migrate to different metro cities in search of good
opportunities and better jobs. Some of them have travelled to a distance of even 1000 km or
more.
Depending on the region the farmers have to migrate to even more than 1000+ km.

Average monthly earnings per family Pre COVID times:

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Monthly Earning
2%

7% 9%

12%

43%
27%

Under 10,000 10001-20000 20001-30000 30001-40000 40001-50000 Above 50000

During Pre COVID times the people who came back from town or even who were there in
village were able to earn an average of 20000-25000 per month. They had a set pattern of
spending those earned money.

Pre COVID-Expenditure Pattern:

Expenditure

Fooding Room Rent Clothing

Children Education Sending Money to Family Health
Entertainment Miscellaneous Savings

COVID has impacted the job market badly:

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Impact of COVID on Jobs

60%

50%

40%

30%

20%

10%

0%
Yes, I have lost the Job Yes, Reduction in Salary No, I was not affected

Impact of COVID on Jobs

Income after COVID crisis

Post COVID monthly income

Under 10000 10001-20000 20001-30000 30001-40000 40001-50000 above 50000

Due to decreased income the demand has been impacted for various sector and impact on
various sector has shown different trends

In rural areas even in FMCG products the cost cutting done by the families was very well
evident. People decreased their purchase for packed and less essential products. But, at the
same time due to increased inflow of the population the market turned into the volume game
and more sales was done. The sales for small sachets was more. People avoided purchase of
the non-essential product which else had better demand in Pre COVID times.

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Impact on differnt products in different Periods

140

120

100

80

60

40

20

0
Pre COVID COVID Phase (Lockdown Phase) COVID (Unlock Phase)

Packaged Products Daily essentials Educational objects Agri-related products

Findings & conclusion

COVID 19 has proved out to be one of the most challenging times that the man kind had
witnessed in the recent past. The phase was challenging for everyone as a person as market and
as industry as well.

The demand in the rural area had shown scattered pattern of demand for different products. But
due to increased inflow of the people from different areas. But, as the people had lost their jobs
so, the propensity to consume was seen to be less. The impact on Purchasing Power Parity has
broken the leg of economy to a very great extent. Government has tried to pump in the money

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by various stimulus packages. Money was put in the pockets of Rural India to Pent up the
demand. But, this was for a small period.

When the lockdown had just begun, then due to fear, public started doing stress buying and
ultimately resulted in short supply of the produce. So, there was temporary increase in the
demand. But, later on with the passage of time this demand declined as the people were not
allowed to go out the demand also shrank. With time as the fear subsided and people started
going out, demand picked up. In the rural scenario, the people who had migrated back to village
made the demand pant up.

Demand for daily essentials had increased. Agricultural products demand increased and had
positive impact on the demand and supply during the COVID. Agri Input companies put in a
lot of effort during that period to push up the sales. Also, due to more people coming back the
massive surge in agriculture involvement was seen. Due to this the demand also increased by
a good %. Also, this year Kharif sowing has increased. Due to this the requirement of agri
inputs also sky rocketed.

Even as the rural demand slightly picks up and the agriculture sector is expected to become the
growth engine of economic recovery, they cannot offset the fall in urban demand. Since the
share of agriculture in India’s gross value added is about 17 per cent, rural demand at best can
extend support to consumption demand, but cannot be a substitute for urban demand, said a
report by India Ratings. After a massive migration towards rural areas, the supply of workers
in the agriculture sector shot up, increasing productivity. However, the flip side of high
agricultural production levels could be lower prices of agricultural commodities impacting
agricultural income itself, India Ratings added.
The Ind-Ra report, therefore, suggested that the government needs to have a well-crafted
strategy in place, both to continuously monitor the progress of kharif crop and prevent the
distressed sale of kharif harvest. Nevertheless, the agriculture sector remained largely immune
from the disruption caused by the coronavirus and is expected to grow at 3.5 per cent on-year
in FY21.
The severe impact of coronavirus on the production, supply, trade channels, and various
sectors, is likely to shrink the Q1 GDP for the first time since FY80. The activities, especially
in sectors such as aviation, tourism, hotels, and hospitality, almost came to a standstill during
the lockdown. Though the non-agricultural economic activities are slowly improving, they are
still much lower than pre-COVID-19 level. India Ratings has estimated that the economy in
the first quarter will contract by 17.03 per cent.
Meanwhile, the optimism may be overblown that the Indian farm sector’s resilience against
coronavirus and government’s rural jobs support will cushion the country’s economy from a
deep impact this year. The government spending on agriculture and rural economy, sale of
tractors, and support through MGNREGA have all been positive, but it is probably still a case
of over-optimism, Sreejith Balasubramanian, Economist — Fund Management, IDFC AMC,
said in a report this week.

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