Recovery from Covid widens India’s urban-rural divide, Citi report says

Citigroup’s broad recovery index indicated a 9.6% jump in demand in urban regions. In contrast, the rural consumption index rose 3.6% and stayed below pre-pandemic levels.

Dukendra Prakash, a national level shooter and a resident of Aligarh's Kastali Vaishya village, was forced to open a food stall in his village in April after his stadium shut down due to the lockdown. | Photo: Suraj Singh Bisht/ThePrint

India’s urban consumption is driving recovery from late pandemic wave but has further intensified the divergence between cities and the hinterland, according to a report by Citigroup Inc released Wednesday.

Citigroup’s broad recovery index in February rose 4.1% from a month ago as curbs to stem the virus spread were lifted, but still below the peaks seen in December. The demand primarily came from urban areas where the index saw a 9.6% jump, crossing pre-Covid levels for the first time. In contrast, the rural consumption index rose 3.6% and stayed below pre-pandemic levels.

“There is sharp difference” in the recoveries, Citigroup economists Samiran Chakraborty and Baqar M. Zaidi wrote. Seven of the nine indicators including fuel consumption, car sales, Google mobility are around their pre-Covid levels driving urban recovery, but rural activity remains a drag with subdued tractor, two-wheelers sales and diesel consumption.

Demand revival in rural India, which comprises about two-thirds of the nation’s population and is a crucial market for manufacturers of consumer goods, is key for India’s recovery. The economy is seen expanding 8.9% this year — the world’s fastest pace — but may face added risks from the current geopolitical tensions.

“For now, none of the high frequency data seems to suggest any impact on domestic activity from geopolitical tensions,” the economists said, “although March trade data to be released next week might provide a better picture in this regard.” – Bloomberg.