Monsoon’s Performance Could Effect The Rural Sector
This year’s monsoon has been uneven and below the normal level which could become a threat to the recovery of the rural economy, reported the Financial Express.
Top executives of the Fast Moving Consumer Goods industry (FMCG) companies has said that the urban demand remaining stable for now, is a comfort. This said, many are keeping a track on food inflation.
The rains have an important role as, even if the sowing of kharif crops is done well, if the monsoons fail, this would fall upon the products, falling upon inflation then.
On the low level of monsoon in August, Suresh Narayanan, chairman and MD of Nestle told The Financial Express, “the kharif crop might get impacted even if the sowing is good,” and he added that if the rains in September would also fall below par, then it could impact the rural demand. He stressed upon a watchful eye on food inflation, though, the rural demand for now was stable.
This year, the June to September South West (SW) Monsoon had fallen low – in deficit. The Indian Meteorological Department (IMD), had said that SW monsoon expanded to 9% of the long period average (LPA). The IMD also said that September would have a normal rainfall. The rainfall in August was low, which has been termed as the driest in over a century.
This does not speak well for sectors dependent on rural economy like the FMCG and the auto sector. The rural economy has an imprint in the auto sector, which includes two wheelers and cars, in which two wheelers accounts for 50% demands from rural and tractors accounts for all the 100% from the rural sector. The demand share of rural sector in auto could fall if the rains are not sufficient.
The concern is not just from the auto sector, but from other sectors too. The Parle products senior category head Mayank Shah told the daily that over 40% of the Parle products are consumed in rural areas. He also said that the comfort was that the urban area demand is stable but this could be of concern in the case of rural demand.
Mahindra and Mahindra’s farm equipment sector President, Hemant Sikka told the newspaper, “Overall, the kharif sowing has progressed well except for pulses. Supported by several other key drivers like robust government support for agricultural and rural growth, increase in minimum support prices, and favourable terms of trade for farmers, we maintain an outlook of low single-digit growth.”
