 "Revenue growth of consumer companies to widen in FY16: Crisil")
Ratings and research firm CRISIL in its latest report has said that revenue growth of companies in consumption-linked categories will widen in comparison to firms in investment-linked businesses in the current financial year.
The gap will be almost 700-800 basis points more than the revenue growth of firms in sectors such as real estate, infrastructure, construction, steel and engineering, CRISIL said in its report released on Tuesday.
While the sales growth of firms in sectors such as packaged foods, auto, textiles and agri-products has surged ahead of those in investment-linked businesses for the last four years, this is the first time the gap will be this high. In the last four years, the gap was in the region of 160-450 basis points, CRISIL said.
India Meteorological Department (IMD) had said last month that rains would be below-normal, pegging it at 93 per cent of the long period average between June and September. It had also said that the probability of a below-normal monsoon was the highest at 35 per cent, while it was 33 per cent for a deficient monsoon, 28 per cent for a normal monsoon and negligible for an above-normal monsoon.
In contrast, Delhi-based private forecaster Skymet had said rains would be normal this year, pegging it at 102 per cent of the long period average for June to September. Skymet also said there was a four per cent margin of error, with a 16 per cent chance of below-normal rains this year.
CRISIL said a deficient or weak monsoon will take away 50 basis points from its gross domestic product (GDP) forecast of 7.9 per cent for the current financial year. “This is the worst-case scenario. But, we go by the assumption that although some monsoon deficiency is predicted in 2015, spatial distribution of rainfall could still be normal, leading to a normal agriculture year, as past experience shows,” it said.
The report also said: “For instance, in the last 15 years, there were two years when rainfall deficiency was 7 to 10 per cent — similar to the IMD forecast for 2015 — but in these years agriculture production did not suffer because rainfall was timely and well distributed. Also, the latest forecast is the IMD’s first forecast and more reliable ones will only be available in June.”
The expectation, according to consumer goods analysts, is that the government is likely to intervene in the event monsoon is weak this year, ensuring that rural growth does not slip. This is critical because rural areas have led the consumption growth in most consumer-linked businesses in the last few years even as urban markets slowed down.
While the rate of growth of urban sales has picked up in the last few quarters in categories such as fast moving consumer goods, rural growth is still ahead of urban.
The gap will be almost 700-800 basis points more than the revenue growth of firms in sectors such as real estate, infrastructure, construction, steel and engineering, CRISIL said in its report released on Tuesday.
While the sales growth of firms in sectors such as packaged foods, auto, textiles and agri-products has surged ahead of those in investment-linked businesses for the last four years, this is the first time the gap will be this high. In the last four years, the gap was in the region of 160-450 basis points, CRISIL said.
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The ratings and research firm attributes this widening gap to a likely consumption uptick this year in the event the monsoon is normal. “If the monsoon is normal then there will be balanced growth in urban and rural areas. In the event monsoon is below-normal, urban growth will be more than rural,” D K Joshi, chief economist, Crisil, said.
India Meteorological Department (IMD) had said last month that rains would be below-normal, pegging it at 93 per cent of the long period average between June and September. It had also said that the probability of a below-normal monsoon was the highest at 35 per cent, while it was 33 per cent for a deficient monsoon, 28 per cent for a normal monsoon and negligible for an above-normal monsoon.
In contrast, Delhi-based private forecaster Skymet had said rains would be normal this year, pegging it at 102 per cent of the long period average for June to September. Skymet also said there was a four per cent margin of error, with a 16 per cent chance of below-normal rains this year.
CRISIL said a deficient or weak monsoon will take away 50 basis points from its gross domestic product (GDP) forecast of 7.9 per cent for the current financial year. “This is the worst-case scenario. But, we go by the assumption that although some monsoon deficiency is predicted in 2015, spatial distribution of rainfall could still be normal, leading to a normal agriculture year, as past experience shows,” it said.
The report also said: “For instance, in the last 15 years, there were two years when rainfall deficiency was 7 to 10 per cent — similar to the IMD forecast for 2015 — but in these years agriculture production did not suffer because rainfall was timely and well distributed. Also, the latest forecast is the IMD’s first forecast and more reliable ones will only be available in June.”
The expectation, according to consumer goods analysts, is that the government is likely to intervene in the event monsoon is weak this year, ensuring that rural growth does not slip. This is critical because rural areas have led the consumption growth in most consumer-linked businesses in the last few years even as urban markets slowed down.
While the rate of growth of urban sales has picked up in the last few quarters in categories such as fast moving consumer goods, rural growth is still ahead of urban.