Rural demand remains strong in June quarter
MUMBAI: The deadly second wave of the pandemic did not cause a major dent to rural demand as was feared when the number of infections surged in India’s villages.
Data analysed by Motilal Oswal Financial Services showed rural consumption moderated in the June quarter when the second wave peaked but was still strong compared to pre-pandemic levels. Urban consumption surged during the period, benefiting from a low base.
According to nine economic indicators, rural consumption grew 6.6% from a year ago in the June quarter, compared with a 16.4% growth in the same period last year. That compared with an average growth of 3.7% in the June quarters of seven fiscal years prior to the pandemic.
The indicators used for the analysis were real agricultural wages, real non-agricultural wages, farmer terms of trade, agriculture exports, fertilizer sales, agriculture credit, Index of Industrial Production (IIP) food products, reservoir levels and rural fiscal spending.
“A simple average of 13 indicators used to estimate rural consumption on a yearly basis up to FY21 shows growth was weak at an average of 3.1% yearon-year (y-o-y) in the initial five years of the century, followed by an average 9.9% y-o-y growth over the next 10 years,” said Nikhil Gupta and Yaswi Agarwal, analysts at Motilal Oswal Financial Services.
The pandemic, which started in fiscal 2021, slowed rural consumption growth to just 2% during the year, data showed.
While rural consumption is continuing to grow despite the Covid blow, natural factors such as the progress of the southwest monsoon and kharif sowing are weak compared to last year.