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After Skymet lowered its forecast for the southwest monsoon, fast-moving consumer goods (FMCG) companies said concerns of a possible drought in Gujarat and west Rajasthan are likely to impact pockets of consumption, but the effect is set to be limited on the sale of packed goods in rural India.

On 23 August, the weather forecaster said the monsoon will be at 94% of the long-period average (LPA) between June and September. It had earlier predicted a normal monsoon. LPA is the average rainfall over a 50-year period between 1951 and 2001. The southwest monsoon made a timely onset and had a good start with June ending at 110% of the LPA. However, July started on a weak note, with a pronged break till 11 July, it added.

“The southwest monsoon encountered the second ‘break monsoon’ phase during the first fortnight of August. Extended weak monsoon conditions resulted in pan-India seasonal rainfall deficiency settling at 9% till the middle of August. The below normal status of monsoon has not improved till now," Skymet said. It also flagged the risk of deficient rains in Gujarat, Rajasthan, Odisha, Kerala and Northeast India. “The chance of drought over Gujarat and West Rajasthan appears imminent."

Skymet, however, said that distribution of rainfall over more populous states such as Maharashtra, Madhya Pradesh and Uttar Pradesh have been “adequate".

“Accordingly, the food production in the agri bowl of central parts may not be stressed and skewed," it added.

A normal monsoon is beneficial for India’s rural economy and helps drive consumption of packaged goods and other discretionary products.

FMCG firms said states with large populations had adequate rainfall in the run-up to kharif sowing. “The three months of the monsoon have been pretty decent and it’s the last month, which is predicted to be below normal, leading to 94% overall. What matters in the monsoon are two things—the timing of shortfall, which impacts sowing, and geographic spread. States with large population have already got decent rainfall and the sowing season for kharif has gone well; and that’s a good sign and overall yields may not suffer," said Sunil Kataria, chief executive, India and SAARC, Godrej Consumer Products Ltd (GCPL). “Overall, the tail of the monsoon season is getting impacted. There should be no material impact on rural growth," he added.

Rural markets drive 36% of demand for FMCG products. The markets have shown steady growth in demand in the aftermath of the pandemic due to a variety of reasons such as extension of the government’s rural stimulus programmes and hike in minimum support prices of certain crops.

Electronics company Usha International, which sells fans and smaller home appliances, said while a weakening monsoon was visible in parts of India, the company is hopeful of recovering any loss in sales momentum in those regions during the upcoming festive season.

“In certain parts of the country, the monsoon has been really bad as far as the agricultural economy is concerned. Those pockets actually account for 15-20% of the total rural economy. We expect with the festive season, we will make up for whatever shortfall that occur now," said Ajay Sharma, senior vice-president, head, rural division, Usha International. Any impact on demand will be visible within a month from now, he added.

Analysts said there could be some impact on demand in Gujarat, Rajasthan, Odisha, Kerala and Northeast India.  "Smaller regional players who have more presence in these states will be more impacted," said analysts at Edelweiss Securities.

GCPL’s Kataria said that rural markets have led the growth for the maker of Cinthol soaps and Hit mosquito repellent over the last four to five quarters. Growth rates could vary going forward but rural will grow ahead of urban, he said.

“We are seeing recovery in 10 lakh-plus towns and middle India towns. So to that extent, I think the rural versus urban delta may narrow, but I still expect rural to be ahead of urban growth," Kataria said.


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