Forecast of a normal monsoon and extension of PM Kisan scheme likely to boost rural income and thereby drive consumption, say cos.
Rural demand for groceries and daily essentials, which showed signs of slowing in the past three quarters, could revive after New Delhi extended the assured income support (PMKisan) scheme for farmers. Expectations that rains would be normal this monsoon season should also lift buying power in the villages. The federal cabinet, in its first meeting after Prime Minister Narendra Modi returned to power with a stronger mandate, last week decided that the government would cover 145 million farmers under the PM Kisan scheme, and irrespective of their land holdings will transfer Rs 6,000 to their bank accounts. The revised programme will now cover 20 million additional farmers. “Higher MSPs and rural stimulus would put more money in the pockets of rural consumers and boost consumerism. The liquidity situation in the market is improving now and a repo rate cut would further improve the situation,” said the homegrown packaged consumer products company Dabur India’s chief executive Mohit Malhotra.
The India Meteorological Department (IMD) has predicted a normal June-September monsoon, while private weather forecasting agency Skymet has pointed to a below-normal monsoon, at 93% of the long period average. Consumption in rural India, which accounts for about a third of the market, has lately outpaced the rate of expansion in cities. Over the past two years, rural growth rates were nearly double of those in urban areas, which have moderated to about 1.1 times last quarter. Sales of branded daily needs in the nation of 1.3 billion people have increasingly relied for growth on the rural hinterland, home to more than 800 million, whose purchase behaviour is largely linked to farm output. The agriculture sector grew 2.9% in FY19, compared to FY18-growth of 5%.
Researcher Nielsen had forecast in April that the FMCG sector would expand 11-12% in 2019 on account of subdued rural sales, a downward revision from its previous forecast of 13-14%. “While a slight drop is witnessed in urban growth, there is a significant softening of growth trends in rural, which is dampening the overall FMCG industry growth from Q3’18 to Q1’19. Historically, rural has grown 3-5% points faster than urban and the recent slowdown in rural growth also brings the growth closer to the urban growth (rates),” Nielsen had said in its report.
