 "People traverse through the first rains of the season")
With good rains during monsoon is expected to boost private consumption especially in rural areas in the country by 8.3 per cent this year as against 7.4 per cent in 2015-16, according to Crisil.
The distribution of monsoon this season has been the best in the last three years. Only a third of the districts saw deficiency compared with almost half in financial year 2015 and 46 per cent in 2014. Importantly, most of the deficient districts are either well-irrigated or not important agriculturally, Crisil Research said in a statement.
The nominal agricultural GDP to rise by Rs 1.49 trillion this financial year, compared with Rs 978 billion in 2016. This is despite a spike in farm output putting downward pressure on prices and farm incomes. Also, the rural markets, which account for 54 per cent of private consumption, is already seeing some green shoots.
Indian economy may expand at inflated adjusted rate of 7.9 per cent this financial year and agriculture GDP at an above-trend four per cent. While CPI inflation would remain contained at 5 per cent.
Dharmakirti Joshi, chief economist, Crisil said this time around, India’s consumption story will have two legs instead of just the urban engine on which it has duked out the past two years.
Over time, rural consumption has shifted from necessities to discretionary goods. Over half of India's consumer durables stock, such as television sets and electric fans, are consumed in hinterland.
Sales of two-wheelers, motorcycles and multipurpose vans indicate that rural demand has recovered in the past few months. In the first quarter of 2017, sales of multipurpose vans rose five per cent and two-wheelers and motorcycles by eight per cent.
Durables picked up pace after de-growth in financial years 2014 and 2015, partly driven by a revival in urban demand. Now, with a good monsoon expected to push up rural demand, consumer durables sales should accelerate.
Growth in consumer non-durables production, which includes fast-moving consumer goods such as food, personal products, cosmetics, cleaning products and fuel that account for 34 per cent of rural demand, appears to have bottomed out.
The higher government expenditure on agriculture and rural development in the first quarter will provide further support to incomes and demand in rural areas, Crisil added.
