Rural Business Confidence Index Captures Business Sentiment of the Rural Economy

24 Feb 2022

India is primarily a rural economy with nearly 6.38 lakh villages and 70% of population living in rural areas. The rural economy contributes to 46% of the country’s national incomes and is central to achieving the Government of India’s dual objectives of becoming a USD 5 trillion economy by 2024 and an Atma Nirbhar Bharat. Yet, there is no mechanism to measure rural business sentiment in India, that can guide key stakeholders on boosting rural economy. 

To bridge this gap, CII and CRIF High Mark developed the Rural Business Confidence (RBC) Index. A first of its kind initiative, the RBC Index will act as a guide to policy and decision makers, Industry and financial institutions, to take appropriate measures to improve sentiment, enable investments and lending, and start new lines of businesses. 

Creating geographically distributed economic growth centers, especially in rural India, is critical to promote equitable and sustainable growth, and most importantly achieve the vision of Aatma Nirbhar Bharat. The intent of this index is to fill the information void by creating a mechanism that can capture how rural economy is performing and support strategic decision making. 

The methodology followed for the Index is a collaboration of CII’s survey with micro, small, medium and large corporations to find out the pulse of the industry (Enterprise Demographics, Financial Sentiment, General and Rural Outlook), CRIF High Mark’s bureau data (Credit related parameters and Individual and Small Business Credit) and Secondary data (Rural specific Macro and Economic Parameters). The first ever Index was released on 12 January. 

According to the Index, with a score of 63.9 for the month of October, the rural business confidence is high on optimism and the Indian Industry is upbeat on the rural economy sentiment. The survey undertaken across sectors from different geographies highlights that 59% of respondents expect their organizations’ order books to improve affecting businesses in rural India; 48% respondents expect profitability of their organization to improve, 54% of respondents expect ease of access to credit to rural economy to improve. Additionally, as per the survey, 88% respondents expect improvement of digital penetration, 72% expect quality of infrastructure to improve and 72% expect improvement in Government initiatives and policies to drive rural growth. 

The Index further illustrates that despite the pandemic, over the last three years from FY 2018-19 to FY 2020-21, disbursement of retail loans in rural India witnessed a growth of 23% by value (from `10.10 lakh cr in FY 2018- 19 to `12.45 lakh cr in FY 2020-21) and 30% by volume (from 506 lakh in FY 2018-19 to 661 lakh in FY 2020-21). 

Rural Business Confidence Index aims to provide an outlook of rural business sentiment for all stakeholders. It is much needed and an all-encompassing view of macro-economic factors affecting rural India, bureau data on rural credit and opinions from micro, small, medium and large corporations across geographies and in different sectors.

Today, more than ever before, Rural Economy has become central to India’s economy. The Government has systematically introduced a slew of enablers to create a conducive ecosystem to accelerate growth. Because of this innate strength and potential, Rural India today is beginning to witness emergence of new players and new models to create the desired localized cycle of growth. The Index will act as critical enabler for taking strategic decisions for rural economy

Read about more CII initiatives and activities in the February issue of the Communique.

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