After many years, the rural economy has returned to its glory! How should the people of the city avail the benefits, where should they invest their money and get profits?

Last Updated:January 17, 2025, 11:19 IST

Investment Tips: After many years, the rural economy has started coming back on track and the city people can also benefit from it. There are many such mutual funds in the market, which invest money in companies focusing on rural development and…read more

Rural economy contributes more than half to India’s GDP.

New Delhi. It is said that India lives in villages. No matter how modern and developed cities may become, India’s economy still revolves around villages. There are two big reasons for this, one is that a large part of the working age population is in rural India and second is that 64% of India’s population lives in rural areas. This is the reason why the rural economy contributes almost half to India’s GDP. After the arrival of Modi government, many steps have been taken to improve the standard of living in rural areas and its benefit was visible in the form of improvement in the rural economy, which has come to a turning point after many decades. But the question is how can the people of the city get the benefit of this boom in the rural economy.

Priyanka Khandelwal, fund manager at ICICI Prudential AMC, says that there were more employment opportunities in cities than in rural areas. Therefore, till now the rural economy was sluggish, but the government policies have started creating big opportunities in this sector also. To take advantage of this, ICICI Prudential Rural Opportunities Fund has been launched. The fund offers investments in rural development and consumption themes by balancing contrarian and structural investment opportunities. It tracks the Nifty India Rural Index, a diversified benchmark covering shares of 11 sectors and 75 companies. Large-cap companies have a major stake in this.

Why is this fund better
The fund focuses on certain structural themes and underperforming sectors, which have the potential to perform well as rural development picks up. With its multi-sectoral and flexible approach the fund aims to navigate the evolving rural landscape and deliver sustainable long-term returns. This also creates an opportunity for investors to get higher returns along with rural growth.

There is great potential
There is huge potential in the rural economy going forward. Rural consumption and savings will be promoted through schemes like Ladli Behna. Agricultural indicators are also looking good which bodes well for farm income in the near term. The government is also increasing the prices of crops due to which the income of farmers is increasing. As the earnings of rural Indians improve, rural consumption is also likely to increase. But, with increase in income, savings should also increase in rural areas and considering the possibility of increase in deposits, the banking sector will also consider expanding its branch network. This is also likely to increase the reach of insurance in rural areas.

Roads will also be expanded
Connectivity is another issue that benefits from rural development. Sectors like telecom and auto could benefit from the investment that has been made in the last decade to improve road infrastructure and power availability. Affordable telecom tariffs and availability of cheap smartphones have ensured that rural Indians are connected to the world, resulting in increased awareness and aspirations in rural India. Public transport infrastructure in rural areas is not as developed, with rising disposable income, sales of two-wheelers and passenger vehicles in rural India may improve.

There will be benefit from increase in income
When household income increases, people desire to live better, look better and feel better. Many consumption-related sectors benefit from this, as we have seen in urban India in the last decade. Rural per capita income is also close to the point where non-food consumption should increase and companies that focus on serving these consumers may benefit from better growth prospects. Investors will get direct benefit from this.

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