Growth in consumption across emerging economies is projected to come largely from rural areas. Take India: consumption per capital in rural areas, is slated to grow by 4.3 times in just 10 years; compared to 3.5 times in urban areas, according to a report by Bain & Company and the World Economic Forum.

Unlike many ageing nations, India will continue to remain a young nation, with a median age of 31 by 2030, and a large part of this young population will be in rural areas. This shift in consumption is already manifesting itself. The rural economy contributes about 46% to the national income, despite increasing urbanization in the last decade.

The rural economy, however, continues to be an informal one, largely cash-oriented with unstructured cash flows. Most of the rural working population is typically the “Earn and Pay” segment, largely excluded from formal employment opportunities and predictable cash flows.

They earn their livelihood in cash and therefore prefer to spend and discharge their liabilities in cash itself. Moreover, given the lack of adequate banking facilities in rural areas, cash continues to be the preferred mode of transaction.

Things are changing on the ground. Once predominantly agrarian, the rural economy is getting increasingly more diversified, with the non-agricultural sector contributing to about two-thirds of household incomes.

Additionally, those living in rural India are no longer as isolated from their urban counterparts as before, thanks to improved internet access. There is a whole generation of mobile-first rural Indians who have leapfrogged generations of technologies to the mobile phone.

The combination of youth, connectedness, education and multiple income generation opportunities is leading to a surge in rural aspirations, and manifesting itself in new consumption choices. Physical and digital connectivity, however, continue to remain constraints.

The government and regulatory bodies have rolled out several policy and financial initiatives aimed at inclusive rural growth. Aadhaar, a unique biometric identifier, zero balance Jan Dhan savings bank accounts, direct transfer of social benefit payments, and the digital payment infrastructure BHIM are just some of them. Click on the link to continue reading the article.