MMA Annual Convention 2025
India’s resilience demands bridging rural-urban divides via technology, finance, and education. Panelists highlight inclusive growth, community empowerment, strong foundational learning, and accelerated digital transformations post-COVID.
“A work-in-progress…”
Varun Prakash
Partner, McKinsey & Company
Two-thirds of our population lives in rural areas, making social resilience and transforming the rural economy critical topics. Half of our population is engaged in agriculture. Our penetration of MSMEs (Micro, Small, and Medium Enterprises) is 10 to 20 percentage points lower than that of other large developed nations. 20 to 25% of our population is likely below the multidimensional poverty line as defined by NITI Aayog. All this indicates that we are a work in progress when it comes to social resilience.
However, there are also green shoots and momentum. We have built foundations that we can continue to build upon. We are the fastest-growing large economy in the world, growing by a couple of percentage points. Our agricultural productivity has tripled over the last two decades in terms of per capita GDP contribution. Similarly, we are starting to create more MSMEs, with about 650 million people having access to the internet, a significant number of them via smartphones. There are many foundations to build upon as we consider social resilience and transforming the rural economy.
Returning to roots
Dr E M Sudarsana Natchiappan, MA ML (USA) Ph.D
Senior Advocate, Supreme Court of India and Former Union Minister
After COVID-19, it feels like we have gone back centuries, reminding us of the potential in our villages and rural areas. The topic of social divisions is important, but in the digital world, these divisions have largely disappeared, except for politicians. People are more interested in showcasing their intelligence, capabilities, and skills, which are also present in rural areas.
Following the COVID-19 disaster, many urban residents moved to rural areas, bringing their knowledge and skills with them. This has led to a resurgence of interest in rural areas, where people have discovered the fertile opportunities they had previously overlooked while seeking urban jobs. Villagers are now well-equipped with digital tools and skills, contrary to the stereotype that they lack expertise. They are ready to meet the exacting standards of the digital world.
In the past, factories were located near ports, airports, railway stations, and highways. Now, with digital connectivity, factories can be located in villages. Many merchants order fresh vegetables, milk, and other products directly from villages. The digital world has shrunk distances, and we need to plan accordingly.
Social divisions are narrowing in the digital world, and knowledge is at our fingertips. Villagers no longer need to seek knowledge elsewhere; everything is available digitally. We must modernize and harness the digital exactness available in rural areas to create a resilient society.
Due to COVID-19, many urban residents have returned to their villages, especially IT professionals who can work from home. They enjoy the nature, social structure, celebrations, and group activities in rural areas. This has led to a shift in urban thinking, with people seeking smaller, eco-friendly living spaces and working remotely.
We are moving away from relying on political systems for basic services. Instead, we are creating self-sufficient communities. Villages are being transplanted into urban areas, and urban areas into villages. This new situation requires us to recognise and utilise the talent in rural areas. Youngsters and other human resources in villages have ample time and access to digital tools, allowing them to connect with the world and gain knowledge easily.
The world is shrinking, and we must plan accordingly. Factories can now be located in villages, and merchants can order fresh products directly from rural areas. Youngsters have ample time to work efficiently and contribute meaningfully, even while traveling.
The digital world has narrowed social divisions and made knowledge readily available. We no longer need to waste time searching for information in libraries or traveling for discussions. The digital audience is much larger now, and people can gain knowledge from their mobile phones.
Before COVID-19, people living in cities rarely returned to their villages for festivals like Diwali or Pongal. Now, millions of people leave the cities for a few days or a week to reconnect with their roots. This shift in thinking has been influenced by global leaders like Trump, who encourage people to stay in their home countries and use their knowledge locally.
People now seek eco-friendly environments, whether indoors or outdoors. This resilience and love for the environment were present centuries ago and are being rediscovered today.
Children’s Education Matters a Lot
Dr Rukmini Banerji
CEO, Pratham Education Foundation
I work for a group called Pratham, which primarily focusses on young children—pre-primary, primary, and to some extent, youth. As Pratham, we engage in a variety of initiatives, with three major areas of work:
Direct Community Engagement: We work directly with communities, both urban and predominantly rural, supporting young children and youth.
Research and Education Status Reporting: We publish the Annual Status of Education Report (ASER) each year. This report provides insights into the state of education in the country.
Bridging Evidence and Experience: We integrate findings from ASER and our field experiences to contribute meaningful insights to broader discussions on education.
The 2024 ASER Report
The 2024 ASER report was released about two weeks ago. It is a simple yet extensive survey conducted in every rural district of India. This year, we covered approximately 605 rural districts, surveying households and assessing children aged 3 to 16. The scale of the survey makes it one of the largest household-based education studies in India, outside of government efforts. In 2024, around 650,000 children participated, ensuring robust sample sizes for each age group.
Key Findings
1. Enrollment Post-COVID
The COVID-19 pandemic had a significant impact on the education system. India was among the countries where schools remained closed for the longest period—nearly two years. The last ASER report, in 2022, reflected the situation immediately after schools reopened. In contrast, the 2024 report provides a post-pandemic perspective, showing continuous school attendance for two and a half years.
One major concern during COVID was whether children would return to school. The data, however, shows the opposite—enrollment levels are higher than ever. For over a decade, India has maintained above 95% enrollment in elementary schools, even in rural areas. Post-COVID, this number has risen further, demonstrating that Indian families value education deeply.
There were also concerns about older children—particularly girls—dropping out. However, the data indicates that more older children have returned to school than ever before. In short, school enrollment levels in India are at an all-time high.
2. Learning Outcomes – Are Children Learning?
ASER goes beyond enrollment numbers to assess whether children are actually learning foundational skills. Foundational learning means ensuring that after a few years in school, children can:
- Read simple text in their native language.
- Perform basic arithmetic operations.
Looking at long-term ASER trends since 2005, we observed that in the early years, nearly 50% of children in rural India, even by Standard 5, struggled with basic reading and arithmetic. While there have been improvements over the years, progress was slow—typically a 1-2 percentage point increase per year. However, the good news from the 2024 ASER report is that this number has now jumped well into the 30s—a significant improvement.
During COVID, learning levels had dropped to the low 20s due to prolonged school closures. But now, we see a sharp rebound. This suggests that large improvements in learning outcomes are possible within short periods, giving confidence to policymakers, educators, and families. If such progress can be achieved in two years, even greater improvements can follow.
3. Impact of the New National Education Policy (NEP)
During the pandemic, while schools remained closed, India introduced a new National Education Policy (NEP). This policy has far-reaching implications across all education levels. Specifically, for primary and pre-primary education, key changes include: Recognizing ages 3-6 as part of formal education. Previously, early childhood education existed, but it is now formally included as the ‘Foundational Stage’ (ages 3-8); Viewing early education as a continuum, ensuring a seamless transition from preschool to primary school.
This shift means that young children now have a longer, structured runway into formal education. The significant learning improvements seen in Standard 3 today may be attributed to: consistent schooling post-COVID; implementation of NEP reforms; and parental involvement. During COVID, families across all income levels played an active role in their children’s learning. This engagement has continued post-pandemic, positively impacting early learning outcomes.
4. Why This Matters for India’s Future
Why should businesses, policymakers, and global organisations care about third-grade students in rural India? India has 25 million children in each grade level. 125 million children are currently in the foundational learning stage. A child who is 8 years old today will be in their late 20s by 2047—India’s 100th year of independence. The capabilities we nurture in today’s young children will shape India’s future workforce, economy, and global competitiveness.
5. The Role of Mothers in Early Childhood Education
A particularly interesting demographic is the mothers of children aged 3 to 8. This group represents the first generation of mothers who have benefited from India’s elementary education expansion over the last 15 years.
Comparing 2010 to 2024, today’s young mothers have significantly higher education levels. Across most states, over 50% of mothers have at least completed Standard 5, with a few states like Rajasthan, Uttar Pradesh, and Bihar slightly below but catching up.
These mothers have three key characteristics: high aspirations for their children; basic education that can support children’s learning; and low labour force participation – particularly in rural areas, where opportunities remain limited. While India has developed strong youth skilling programs, there is still a huge opportunity to engage educated young mothers—both to support their children’s education and to contribute productively to the economy.
Ensuring strong foundational learning is not just the government’s job, nor only the responsibility of parents. It is a collective responsibility. The future of India in 2047 depends on the children in early grades today. If we aim for a globally competitive, resilient economy, investing in foundational education must be a national priority.
Economic Growth and Financial Inclusion
P N Vasudevan
MD & CEO, Equitas Small Finance Bank
India is on the path to becoming the third-largest economy, set to surpass Germany and Japan within a few years. While this is a remarkable achievement, the key question remains: is this economic growth benefiting all Indians, or just a select few?
The government once proposed renaming India as ‘Bharat’—a move that could have symbolized the inclusion of the vast rural and underprivileged population. Today, the divide between ‘India’—the urban elite—and ‘Bharat’—the rural and marginalised—remains stark. The challenge is ensuring that the benefits of our rapid growth reach all 140 crore citizens, not just a privileged segment.
A Persistent Challenge
Since independence, multiple efforts have been made to drive financial inclusion. In 1969, nationalisation of private banks happened to extend banking services to the masses. 1970s saw the introduction of Priority Sector Lending (PSL) mandates to ensure credit reaches underserved sectors. Regional Rural Banks (RRBs) were established to focus on rural banking needs but they were largely phased out. One of the most successful financial inclusion models initiated under Dr. Rangarajan’s leadership was the Self-Help Groups (SHGs). Then came the Small Finance Banks (SFBs) which are aimed at expanding financial access. However, their long-term impact remains to be seen. Despite decades of initiatives, financial exclusion remains a pressing issue.
The Reality of Exclusion
Less than 15% of Indians have access to bank loans. Credit card penetration is below 12-13%. Only 5% of micro and small enterprises receive bank credit. The unmet credit demand of the lower-income segment is around ₹50 lakh crore, while total banking credit in India is approximately ₹250 lakh crore—indicating a 20% gap.
More Banks, More Inclusion
While policies and regulations have evolved, the core issue remains, which is insufficient banking infrastructure to serve the underserved. The RBI has taken steps by introducing on-tap banking licenses, allowing entities to apply for a bank license anytime instead of waiting for limited application windows.
But policy alone isn’t enough. We need 100-200 more banks, not just a handful, to bridge this gap. The good news? Starting a bank today is not as daunting as it once seemed. With the right vision and determination, capital will follow. The success of recent IPOs shows there is no dearth of investment; what’s needed is intent and action.
A Call to Action
As was said in an earlier session, a resilient India starts with you and me. Similarly, an inclusive India must start with us. Financial inclusion is not just a government responsibility; it is a collective mission. Let’s work towards a future where economic growth uplifts all, ensuring that when India becomes the world’s third-largest economy, Bharat is not left behind. The path is clear. The opportunity is here. Now, it’s up to us to take the lead.
Panel Discussion
Varun Prakash: From your conversations with the customers in rural areas that you work with, what would it take for them to transform their lives? What are the facets of change that they would like to see to make this happen?
P N Vasudevan: The problem of inclusion is very high even in urban areas, but in rural areas, it becomes even more difficult because access becomes a big issue. At least in urban areas, access is not an issue; affordability may be. So, why are people moving and migrating out of villages? They migrate because they don’t have access to finance, livelihood, quality education, or quality healthcare. To lead a decent life, they believe they have to go to urban areas to earn money.
Addressing this is a big issue, and it’s not a small one at all. In fact, we have taken one village near Kanchipuram as a role model to see if we can completely enable reverse migration by empowering that village or that cluster of villages on all fronts. We have been at it for almost a year now, and I can tell you, we are still at the surface. We haven’t been able to penetrate deeper. We have come to the conclusion that we need a large amount of governmental intervention. Ideally, it should be a government-led project with the private sector, like us, providing support. That’s the challenge of rural areas—especially access.
Varun Prakash: Dr. Banerjee, you mentioned that in education, access may no longer be the challenge. Enrollment and basic literacy levels are sufficient, and children aged three to eight are getting better educated. However, earlier speakers emphasised the need to become a product economy, which requires capabilities and expertise. Considering the journey from learning basic arithmetic to building a product company in a rural area, what would it take?
Dr Rukmini Banerji: That’s a long leap, but I’d like to highlight a couple of points. Beyond the basics, there’s a significant gap until reaching excellence. In middle schools (grades 6, 7, and 8), many children lack foundational skills, hindering their progress. By the time they face the pressures of 10th and 12th exams, there’s little room for innovation unless we reform the examination system.
For ages 14 to 18, a crucial group, many children have high, traditional aspirations for white-collar jobs but lack interest in vocational training. Despite the potential of vocational skills, the academic focus on white-collar jobs persists, making it difficult for young people to embrace alternative career paths.
Entrepreneurial skills can’t develop suddenly at 30; they need to be cultivated from a young age through family influence or experiences. Our education system focuses on individual excellence, but the real world needs collaborative problem-solving skills. Many parents prioritise academic success over diverse experiences that could benefit their children.
We need to provide young people with practical work experiences before they enter the labour market, freeing them from the sole focus on exams and white-collar jobs. This approach can prevent disappointments linked to unrealistic expectations about traditional career paths.
For instance, in rural Chhattisgarh, middle school students worked on understanding water supply issues in their village. This hands-on, locally-based project yielded solutions that even children could discuss with their panchayats. Encouraging such practical projects can connect students to real-life situations and foster problem-solving skills. We should look at examples where community-driven solutions are effective and build on them. Connecting students to real-life situations at different ages is essential for holistic development.
Varun Prakash: How can we strengthen community-based organisations to help them perform better and govern better?
Dr E M Sudarsana Natchiappan: I can list about 15 parliamentary enactments. For example, the Food Security Act, Right to Education Act, Right to Health, and the Panchayat Act.
The Panchayat Amendment and Constitutional Amendment Act empower the Gram Sabha, the lowest assembly at the village level, to plan and implement projects using local resources like water channels, tanks, and other community properties. Funds are allotted by both central and state governments. Scheduled tribes have been given land rights for the first time. The Mahatma Gandhi Rural Employment Scheme ensures the right to work, aligning with the Directive Principles of State Policy. The Right to Information Act creates awareness among villagers about the utilisation of public funds for community projects. The Women’s Property Act and village planning initiatives also play a crucial role.
Village courts and mediation centers have been established to reduce litigation costs. Disaster management centers connect villagers with real-time climatic information. Rural health centers and cooperative societies for finance, milk, traditional handicrafts, and food exports provide livelihoods. For example, in my area, Chettinad, village housewives make beautiful baskets that are exported to foreign countries.
Community-level thinking has moved beyond caste divisions, although some clashes are created by social engineering. Politicians may exploit divisions for votes, but in the digital world, there is no difference. After COVID-19, many graduates, engineers, PhD holders, and IT specialists have returned to their villages to manage their areas with their knowledge. This is a significant development.
Parting Thoughts and Advice:
P N Vasudevan: Extend financial inclusion efforts to your neighbourhood and sphere of influence, helping those in need.
Dr Rukmini Banerji: Focus on the value added by each year of schooling. As institutions, prioritise human development over infrastructure in CSR initiatives. Encourage young people to explore real-world learning experiences outside of traditional academics.
Dr E M Sudarsana Natchiappan: Urge youngsters to bring people out of their ‘comfort zones’ and encourage their participation in society and national development. India has significant potential, and its knowledge should be harnessed for progress.
