Rural development needs a boost: India must step up efforts to take prosperity far and wide

Official Periodic Labour Force Survey (PLFS) data has captured the impact of the post-covid reverse migration. Of the 83 million jobs added between 2021-22 and 2023-24, 40 million have been in agriculture. The number of women in own-account self-employment has seen a nearly fourfold increase since 2017, according to the State of Working India 2026 report. At the same time, self-employment earnings among women and salaried earnings (for men and women) have largely stagnated.

These labour market dynamics are reflected at the macro level in real household earnings and consumption in the economy remaining below the pre-pandemic trend; average monthly per capita consumption expenditure rose from ₹3,773 to ₹4,122 in rural India between 2022-23 and 2023-24. The reverse migration underway may further delay a recovery.

The budget will of course provide security nets, free food and welfare to those returning to villages, and administrative efforts can minimize the disruption, but policy makers could aim for more.

In addition to providing safety nets, rural schemes can be made conduits for drafting excess supply of labour into quality jobs in rural areas, which can deliver higher earnings to workers and make productive contributions to growth. Re-imagined this way, rural schemes can meaningfully support consumption demand and GDP growth.

The creation of sustainable rural livelihoods during lean periods of cropping and non-peak seasons of manufacturing can reduce underemployment (or disguised unemployment) among agricultural workers and migrant labourers, provide year-round employment opportunities, and at the same time help develop rural infrastructure and productive assets.

All this would lead to higher income, higher spending capacity and inclusive growth, given that the majority of India’s population resides in rural areas.

That would help grant rural Indians economic resilience. While the government seeks to strengthen the country’s resilience through self-reliance (or atmanirbharta) in these times of global upheaval, this goal needs more than secure access to key supplies and strategic resources.

The current approach towards rural development falls short, though. The rural development ministry, which was created as an institutional response to the persistent structural challenges of poverty, unemployment, infrastructure gaps and livelihood insecurity, has a number of programmes under its wings. Its vision was to go beyond welfare delivery.

From early initiatives such as the Pradhan Mantri Gram Sadak Yojana for rural roads to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) that introduced a rights-based job guarantee to address rural distress, these schemes collectively seek to expand physical connectivity, employment, infrastructure, housing and social protection.

From fragmented welfare interventions, these schemes have evolved over the past two decades into a more integrated rural development architecture. Still, the structural shift in consumption demand they ought to have delivered at the macro level has not taken place.

In the Union Budget for 2025-26, the government had proposed a Rural Prosperity and Resilience Programme (RPRP) for strengthening rural livelihoods by promoting income stability, diversification and resilience to shocks. That proposal still stops short of seeing rural labour as a source of GDP growth—perhaps because ‘how’ this could be done is missing from our policy discourse.

With reverse migration back in focus, this seems like a good time to follow through on the RPRP.

The programme design will be key. It will have to be differentiated from the MNREGA, which has been effective as a welfare safety net but is less suited as a long-term development instrument in its current form.

Its impact on productivity has been limited; a report of a Niti Aayog sub-group of chief ministers has shown that it is not adequately aligned with agriculture and productivity-raising activities such as irrigation, land development and rural infrastructure.

A study from Karnataka has shown that while fund utilization under MGNREGA has been over 95%, the quality and durability of assets created remain poor while its long-term productivity outcomes have been suboptimal.

These shortcomings led to a revamp of the MGNREGA into the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Gramin (VB-G RAM-G) scheme, but more may still have to be done to incentivize the creation of quality job opportunities. Consider two loose ends.

One, although the budget for 2026-27 introduced the scheme that will replace MGNREGA , even four months after being given legal backing by an enactment in December, it is still not operational as the rules haven’t been formulated and notified.

The revised scheme will enhance work guarantees to 125 days from 100 and has focused on infrastructure-linked development and productive-asset creation, but its rules are awaited before methods to fund projects—based on priorities—can be spelt out.

Two, moving from a ‘Right to Work’ architecture to sustainable livelihood creation and inclusive growth, never easy, will be constrained by the fiscal space available in state budgets.

If the RPRP is designed appropriately, its quick rollout could go a long way towards building a truly resilient India.

These are the authors’ personal views.

The authors are, respectively, consultant; senior fellow (consultant); and professor, Indian Council for Research on International Economic Relations.