Despite the growth of numerous manufacturing and service sectors over the years, India has always relied on agriculture both for its economic growth and employment. This is mainly because over 60% of its population resides in rural areas. One of the important factors that will drive rural prosperity is having access to stable and diverse employment opportunities that will provide regular income. Along with the employability, it increases the stability of household income. This in turn will have a significant impact on consumption patterns in both rural and urban areas of the country.
It is said that a stable consumption pattern is the core aspect of the economic stability of a country. For it makes sure of the predictable demand for goods and services, thereby reducing market volatility and supporting economic growth. Before we go on to discuss the connection between employability in rural areas and stable consumption behaviour across the country, let’s understand what stable consumption behaviour actually means.
Understanding Stable Consumption Behaviour
Stable consumption behaviour is a financial planning concept that has been developed and tested by renowned economists across the world. It refers to the practice of maintaining an average level of spending or expenses over a period of time, irrespective of the variations in their revenue. It is commonly referred to as consumption smoothing by experts. Consumption smoothing, according to Investopedia, is a practice of optimizing people’s standard of living by maintaining a proper balance between expenses and saving during various phases of life.
Consumption smoothing is aimed at offering a cushion to individuals while dealing with unexpected expenses, economic downturns, and income volatility. The cushion can be achieved by saving money whenever one gets a high income and spending the saved money during the income volatility or after retirement.
It is considered an extremely difficult idea to put in place. For it requires vigorous planning, and one needs to stick to the budget in all situations. But it is one of the aspirational ideas that will allow individuals to have a relatively predictable and stable way of living through their lifetime. Stable consumption behaviour promotes the financial resilience and stability of an individual.
Link between Increasing Employability in Rural India and Stable Consumption Behaviour
For a layman to understand the impact of the rise in rural employability on the stable consumption behaviour of the country, it is vital to break down and understand the relationship between employment opportunities, income stability and consumption patterns. Let’s discuss the relationship in detail.
When the government attempts to increase employment opportunities in rural areas, they diversify and create opportunities in various sectors like manufacturing, service and agriculture sectors. Because diversification of opportunities spreads risk. It will also make sure that even if one sector faces challenges, other sectors can prevent the economy from destruction. For instance, if agriculture fails due to droughts or fluctuating commodity prices, manufacturing and service sectors will buffer the financial strain. A diversified rural economy will lead to greater resilience in consumption patterns even during shocks.
The increased employability in turn will allow people to grab stable, formal and diverse forms of jobs. This will eventually reduce revenue fluctuations caused by seasonal and limited employment opportunities and lead to a steady stream of income.
When a household gets a stable income, they can predict their financial situations and plan their finances accordingly. Better planning and spending as per their budget will make their consumption patterns more consistent.
When people in rural areas get steady income, they can afford to purchase goods and services on a regular basis. This regular consumption of essential goods and services becomes predictable. Also, the chances for discretionary spending on non-essential goods and services will increase. This in turn will stimulate unprecedented demand in the economy. This consistent consumption pattern will reduce fluctuations in production cycles and allow small and medium rural businesses to plan and produce better.
As small and medium enterprises grow and employ more people, a higher flow of money starts to circulate within the region. A resilient and self-sustaining rural economy will contribute greatly to national economic stability. For it creates a more balanced regional consumption pattern.
Moreover, when an individual gets a stable income, financial institutions are more likely to offer loans. Not just that, banks will also encourage rural consumers to save, invest, and spend more predictably. This will also help in smoothing consumption even during times of unexpected expenses.
Raised revenue will directly lead to increased purchasing power. (Purchasing power refers to the quantity of product or service that can be purchased with a particular currency unit.) This in turn will also reduce the consumption between the rural and urban areas, thereby reducing stark economic disparities between rural and urban areas. This will lead to a uniform consumption trend across the country.
This is how the stability in consumption patterns in rural areas will have a cumulative effect on the country’s economy.
Current Trends in the Rural Labour Market
For the first time since the Covid-19 pandemic that hit the globe in 2020, annual average employment demand for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has fallen below the pre-pandemic levels. Under the scheme, temporary jobs are provided to people in rural areas with limited or no stable income opportunities. According to the data accessed from their website, the average number of people employed under the scheme in 2024 is 25,000. Following the pandemic, the number had moved close to 40,000 in 2021.
A reduction in the number of employees under the schemes means there has been a rise in other stable employment opportunities in rural areas. This year has received above-average monsoons, thereby rising employment opportunities in the farm sector.
According to the latest PLFS report, employment opportunities in the construction sector have rebounded due to initiatives like the national infrastructure pipeline and increased government capital expenditures. Not just that, employment in manufacturing and service sectors has also increased considerably.
Conclusion
In summary, increasing employability in rural India like through Smile’s women empowerment programme Swabhiman will lead to a stream of stable income. This in turn contributes significantly to the stable consumption behaviour in rural areas. This smooth consumption will help rural households to manage their financial needs effectively. This will also create a more predictable and resilient consumption environment at the national level. As rural consumption stabilises, it can contribute to more consistent demand for goods and services, fostering overall economic stability and growth in India.