India Economy Watch - Rural Consumption Weakens In Q2: Motilal Oswal
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Motilal Oswal Report
After double-digit average growth in H1 CY21, rural consumption finally lost steam last quarter, declining 2.4% YoY in Q3 CY21/Q2 FY22.
As many as seven of the 11 indicators used to determine the trends in rural consumption contracted in Q2 FY22, with double-digit growth in only one indicator – farm credit.
The deterioration in farm terms of trade (with rising input costs and weak output inflation) is the worst in the past quarter of a century.
In contrast, urban consumption grew 9.5% YoY in Q2 FY22, partly offsetting the losses seen in H1 FY21. All seven indicators posted better growth in Q2 FY22 vis-a-vis Q2 FY21, largely supported by the base effect.
Overall, after growing at an average of 6% in FY20/FY21, rural consumption grew 1.6% YoY in H1 FY22. In comparison, urban consumption grew at a strong 16% YoY following average decline of 1.1% in the previous two years.
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