Mumbai: Motorcycles sales in India have risen at a much faster clip than scooter sales for the third consecutive month, indicating a recovery in the country’s rural markets after the twin disruptions of demonetisation and the implementation of the goods and services tax (GST).

India is the world’s largest two-wheeler market in terms of sales. Among motorcycles, growth was led by the entry-level segment (engine capacity between 75cc and 110cc) and the commuter segment (engine capacity between 110cc and 125cc), the mainstay of the rural markets, where customers prefer no-frills motorcycles to gearless scooters in urban India.

Both segments have either outpaced or levelled with the broader motorcycle segment since November 2017, when motorcycle sales growth came back in the black.

India’s largest motorcycle maker, Hero MotoCorp Ltd, Pune-based Bajaj Auto Ltd and the maker of Activa, Honda Motorcycle and Scooter India (HMSI) Pvt. Ltd, will benefit the most from growth in these two segments.

While motorcycle sales were subdued for the past three years, HMSI was able to post gains in market share in India’s two-wheeler market with its Activa scooter. But these gains might now be nullified by erstwhile partner Hero, which sees 50% of its sales come from rural areas.

This development has snapped the trend of galloping scooter sales since demonetisation in November 2016. Scooter sales grew faster (or contracted less) than motorcycle sales in 13 out of the 16 months till February this year, when motorcycle sales began to pick up pace over scooters.

Purchasing power in the heavily cash-dependent rural markets came under severe pressure when high-value currency notes were scrapped by Prime Minister Narendra Modi on 8 November 2016. These markets, apart from the rest of the economy, also saw a major slowdown in adjusting to GST, implemented on 1 July last year.

Increased infrastructure building, in addition to expectations of another good monsoon and higher minimum support prices (MSP), will buttress rural demand in future, say analysts.

“Higher farm incomes, led by higher MSPs announced for the kharif crop, in addition to better road connectivity, loan waivers announced by various state governments and the 7th Pay Commission will support demand for two-wheelers from rural areas," said Darshini Kansara, research analyst, Care Ratings Ltd.

Kansara expects rural demand to outpace urban demand for motorcycles over the next three to five years.

However, analysts also expect scooters to grow at a faster pace on the back of rising rural penetration, among other factors.

“We expect scooters to grow by 14-16%, followed by motorcycles and mopeds at 8-10% and 6-8%, respectively," said Binaifer Jehani, director, Crisil Research. Scooters are expected to grow at a faster pace on the back of improved affordability, stronger product launches, multiple ownership, and rising rural penetration, he added.

Crisil Research projects the two-wheeler industry to grow by 10-12% in fiscal 2019, supported by a normal monsoon, improved affordability and positive rural sentiment.