×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Rural economy strong despite poor monsoon

Rural economy strong despite poor monsoon
Comment E-mail Print Share
First Published: Tue, Jun 08 2010. 11 14 PM IST

Updated: Tue, Jun 08 2010. 11 14 PM IST
India’s farm gross domestic product (GDP) rose marginally in the year to 31 March, despite one of the poorest monsoons in over a decade. An IIFL Capital Pvt. Ltd report, which points this out, says this is in stark contrast to the experience in the year till March 2003, when a poor monsoon had resulted in a 7% decline in farm GDP. On an all-India basis, the rainfall deficiency was around 20%, nearly as high as that experienced in fiscal 2003.
Sangeetha Saranathan, an analyst at IIFL Capital, writes in the report that though the deficiency in rainfall was high, better irrigation saved the day. “Among the key factors holding up India’s real farm output growth was the rise in the share of irrigated land as a proportion of the country’s total sown area. From around 40% 10 years ago, the share of irrigation has moved up to 50% at present,” she wrote. This, coupled with a sharp rise in the prices of farm commodities, led to a sharp increase in rural incomes last year. IIFL estimates that Indian farmers’ earnings expanded by Rs43,000 crore last fiscal. This translates into a 5% increase in rural consumption spending.
Also See Increasing Incomes (Graphic)
The pertinent question is whether all of this is reflected in the corporate data on rural consumption. Indian firms typically don’t report a break-up of sales between rural and urban centres, but a recent investor presentation by Dabur India Ltd mentions the growth of the market for home and personal care products for the rural segment, based on ACNielsen data. In calendar 2009, the rural segment grew 18%, much higher than the 11% in the urban segment. The rural segment, which accounts for 33% of the entire market, had grown by 12% in the year to December 2008, while the urban segment grew by 15%.
It’s interesting that the rural market for personal and home care products did better than urban centres in a bad monsoon year, though part of the reason could be the outlays on programmes such as the rural job guarantee scheme.
The monsoon is expected to be much better this year, and with commodity prices remaining stable, rural consumption should continue to be strong. Of course, the beneficiaries of this aren’t just companies making personal and home care products, but are also auto manufacturers who have an increasing share of revenues from the rural markets.
Mobis Philipose
Graphic by Yogesh Kumar/Mint
We welcome your comments at marktomarket@livemint.com
Comment E-mail Print Share
First Published: Tue, Jun 08 2010. 11 14 PM IST