The period October-December will hold the clue to prospects of a recovery in consumer goods sector-Care Ratings

The growth of 2% in the month of September 2013 comes as a disappointment after the release of 8% growth in core industries. Near zero growth of consumer goods is indicative of no turnaround in the consumer spending. Basic goods registered a robust growth of 5.4%; however this can be mostly attributed to government sector spending on infrastructure (reflected partly in growth in steel and cement). Furthermore, since the government's fiscal deficit in the first six months of the current fiscal has already reached 76% of the budget estimate, most of the impetus in H2 FY14 needs to come from the private sector if a recovery is to take place.

The government is hopeful that the economy will start to recover in the second half of the fiscal on higher farm output and exports. The Finance Ministry expects the GDP for the current year to settle in the range of 5 to 5.5% on back of good monsoon, robust farm output and impact of reform measures undertaken by the government in past one year.

CARE has been optimistic of a revival in consumer demand, which was expected from September onwards as it coincides with the harvest cum festival season. It does appear that households have not started spending and while there is still hope that they would in October, there is a cloud of uncertainty. With demand for gold coming down in October (based on trade data), it is expected that consumer spending should increase, notwithstanding erosion of spending power on account of higher food inflation. Therefore, the period October-December will hold the clue to prospects of a recovery in this sector.

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