Rural To Offset Waning Urban Demand: iThought’s Shyam Sekhar
Come January, the consumption pattern in the rural sector will change as farm incomes rise, according to financial advisory firm iThought.
Rural India will purchase a lot of durable products this year, founder Shyam Sekhar said. Instead of just spending on vehicles, “rural India will see a lot of durable purchases and investment in electrical products like air conditioners and refrigerators”, he told BloombergQuint. “Basically, people will raise their lifestyle.”
Farmers will also spend on automation on the farm and improve their practices with soil, Sekhar said.
The country has seen below-normal rainfall this monsoon, especially in central and western India, which will produce moderate crop. That, in the context of the government-assured minimum support price, is a positive for farm income, he said. “You won’t have too much of a surplus like last year and with the MSP we are looking at more money in the hands of rural India starting December-January.”
India’s economy returned to 8 percent growth for the first time in two years in the quarter ended June on strong consumer demand. The agricultural sector grew 5.3 percent compared to 3 percent last year, while private consumption grew at 8.6 percent compared with 6.7 percent.
But all of India will not face a similar positivity, Sekhar cautioned. “The urban middle class is not going to have it so good this year. Whatever companies gain on the rural side, they will feel the pressure on the urban side.”
Watch the full conversation here: