Consumer non-durables growth back in green: Is rural demand reviving?
After contracting for 11 months continuously (except for October 2015), growth in consumer non-durables turned positive in June
After contracting for 11 months continuously (except for October 2015), growth in consumer non-durables turned positive in June. Though the number is a feeble 1%, it is being cheered by some economists as they see this as a sign of a turnaround in rural demand.
Consumer non-durables’ growth was led by tobacco and apparel segments, perhaps indicating early signs of an improvement in rural demand, Nomura said in a report.
Continuing with that optimistic tone, ratings agency Icra Ltd said, “With monsoon turnout and kharif sowing suggesting that a pickup in rural demand is on the anvil, the volume growth for consumer non-durables should strengthen in the second half of FY2017."
Sowing of rain-fed kharif crops has been completed in 95.4 million hectares or 90% of the normal area planted during the season, boosted by abundant rainfall across India, recent agriculture ministry data shows. Farm incomes could be up by double digits, after three years of decline, in FY17, supported by an increase in net sown area, higher yield and supportive prices, a JM Financial Institutional Securities Ltd report said.
On the other hand, some economists like Devendra Kumar Pant of India Ratings and Research Pvt. Ltd and Madan Sabnavis of CARE Ratings feel it is too early to call this an indication of revival in rural demand since benefits of a good monsoon haven’t percolated to rural incomes yet.
“Consumer non-durables typically have a steady inelastic demand and are related in a minimal way to revival in sector-specific demand. Probably, three successive high-growth rates can enable a conclusion that rural demand is reviving, but we need to wait and watch as rural incomes will get a boost after September," said Sabnavis.
The writer does not own shares in the above-mentioned companies.
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