Just how badly will the drought hit GDP growth? In 2002, when the shortage of rainfall was around the same as it is this year (20 per cent from the long-term average), agricultural growth fell to -7.2 per cent and, as a result, GDP growth in that year was just 3.8 per cent (average growth in the 5-year period 1997-2002 was 5.5 per cent). The mitigating factors this year, apart from the September rains, will be the farm-loan waiver and the NREGA expenditure. In the past, according to a Citibank report, rural demand — which comprises around half the total consumption in key categories — has been a swing factor, as a result of which, overall demand has by and large moved in tandem with the monsoon.
Rural demand today accounts for 40 per cent of all scooter purchases, 48 per cent for motorcycles, 44 per cent for televisions, 63 per cent for edible oils and so on. So far, anecdotal evidence suggests demand in rural India is holding up. Watch this space.
| The jury is still out on rural consumption Rural share of Consumer Demand (%) | |||
| FY96 | FY02 | FY10E | |
| Scooters | 33.1 | 39.4 | 39.9 |
| Motorcycles | 47.3 | 39.8 | 48.3 |
| Mopeds | 52.7 | 58.2 | 57.7 |
| Cars/jeeps | 2.1 | 8.0 | 10.9 |
| Automotive | 37.9 | 36.0 | 37.9 |
| TVs | 54.0 | 54.5 | 44.2 |
| Other white goods | 23.8 | 23.9 | 23.7 |
| All fans | 50.0 | 56.9 | 56.7 |
| Other low-cost items | 58.1 | 60.1 | 61.3 |
| Shampoos | 27.2 | 31.9 | 33.0 |
| Edible oils | 64.3 | 67.1 | 62.9 |
| Washing cakes | 68.7 | 71.4 | 75.6 |
| Source: NCAER, Citibank | |||
