THE BSE-CMIE TRACKER
The BSE-CMIE-UMich Index of Consumer Sentiments declined sharply by 3.7 per cent in June.
Sentiments declined across urban and rural regions. Urban sentiments were down by a marginal 0.18 per cent. But, rural sentiments plunged 5.56 per cent.
This sharp fall in rural sentiments at the end of the first month on monsoons should be a source of worry.
A state-wise analysis reveals that sentiments declined in those states that received poor rains and they improved in those states that received good rains. Since the monsoon reaches north India only towards the end of June, we see the relationship between rains and rural sentiments only in the states south of the Vindhyas and in the eastern states.
Rural sentiments declined sharply by about 35 per cent in West Bengal and Kerala during June. Both states received less-than-normal rains during the month. Rains in West Bengal were 15-20 per cent lower than normal. In Kerala, it rained well in the last week of June, yet the cumulative rains during the month were 6.6 per cent below normal. Rural sentiments fell 21 per cent in Karnataka, 18 per cent in Chhattisgarh and 14 per cent in Madhya Pradesh. Rains were below par in all these states.
Maharashtra and Telangana received excellent rains and rural sentiments were up eight per cent and 19 per cent in these two states, respectively.
Jharkhand and Andhra Pradesh were outliers, though. In Jharkhand, rains were 37 per cent below normal but, rural sentiments were up by 53 per cent. In Andhra Pradesh, rains have been about 50 per cent above normal but rural sentiments were 14 per cent down.
Kharif sowings have started picking up. Foodgrain acreage was up by 9.5 per cent. Even arhar sowing has picked up although it is still 11 per cent lower than during the same period of the previous kharif season.
While sowings have picked up, rains have played truant. The first two weeks experienced 17 and 12 per cent higher precipitation than normal; but the next two weeks saw precipitation fall to 11 per cent and five per cent below normal. Overall, the monsoon was 0.14 per cent below normal till June 28.
Urban sentiments have been consistently lower than rural sentiments. In June, they were seven per cent lower than rural sentiments. Urban sentiments are also less volatile. Rural sentiments have been subjected to substantial external shocks in recent months, ranging from crashing prices and loan waivers. There is no matching external stimulus to spur urban sentiments. They have suffered a falling labour participation rate after demonetisation.
Urban sentiments have been poor across town-size. Interestingly, while rural sentiments have been quite buoyant, small towns have been very negative. This is evident from the region-wise distribution of consumer sentiments during January-April 2017. Urban sentiments are split into four town-size groups based on the number of households in 2011. Very large towns are those that had more than 200,000 households then; large towns are those that had between 60,000 and 200,000 households, mediumsized towns are those that had between 20,000 and 60,000 households and small towns had less than 20,000 households each.
Small towns are mostly census towns, or semi-urban towns. They have a population of more than 5,000 and at least 75 per cent of the working population is employed outside agriculture. These towns accounted for 30 per cent of the growth in urban population in the 2011 Census. Before their classification into census towns they were villages. So, in many ways these small towns are very similar to villages. But, their consumer sentiments are starkly different from their rural counterparts.
During January-April 2017, the allIndia consumer sentiments index was 96.5. The index for rural India was 99.5. But, the index for small towns was much worse at 87.9. In fact, while rural India had the best index, small towns had the worst. One possible explanation for this is that the sops being given out to farmers in the villages do not accrue to these small towns. But, since their economies depend a lot upon the agro-economy around it, they suffer the ill-effects of demonetisation and the consequent fall in trade. The index for mediumsized towns was a shade better at 88.7, but only just.
Large towns were much better at 96.5. In fact, they were just at the allIndia average level. But, the very large towns were a shade lower at 94.7.