Tractor sales, a bellwether for rural demand, are headed for a record growth in June
Among those who stand to benefit are consumer durables makers and farm input producers
NEW DELHI :
Businesses are banking on a bumper harvest and high rural incomes to drive demand for goods after the coronavirus pandemic stunted growth in the country’s cities, where most of the factories and offices are located.
Business leaders expect a normal monsoon, record sowing of summer crops, improved winter harvest and a raft of government measures to increase rural incomes to boost demand for goods ranging from two-wheelers to tractors. Among others that stand to benefit are consumer durables makers, farm input producers, cement firms and essential goods manufacturers.
Tractor sales, a bellwether for rural demand, have picked up strongly across rural belts and are headed for a record growth in June, industry executives said.
“Demand is robust due to various factors, including a strong rabi output, good price realizations and higher government spending in rural India," said Hemant Sikka, president, farm equipment, Mahindra and Mahindra Ltd, the country’s largest maker of farm equipment.
Raman Mittal, executive director at tractor maker Sonalika Group, said farmers’ sentiments continue to be upbeat and June deliveries are expected to surpass May figures—26% higher from a year earlier.
Two-wheeler maker Hero MotoCorp Ltd expects a clear uptick in customer sentiment. “We have been seeing robust retail demand and the numbers are improving week-on-week. Customer demand has been positive across the country, except for the markets badly affected by covid, such as Maharashtra and Gujarat," said a Hero spokesperson.
Fortunes of two-wheeler makers are closely tied to that of the rural economy. Almost half of Hero’s sales come from the rural market.
Parle Products, which sells the popular Parle G biscuits, expects demand for packaged foods to improve in rural areas. “Rural has been better compared to urban in terms of off-takes," said Mayank Shah, category head, Parle Products. Shah said that outlets in isolated rural markets have been opening, giving a boost to demand while rural households benefit from the government’s stimulus announced in May to combat the economic slump.
The emergence of green shoots in the rural economy suggests that the pessimism surrounding India’s economic growth may be overdone, economists said.
The resurgence in rural India can help the country partially offset losses suffered by worst-hit sectors such as tourism and aviation.
The share of agriculture in the country’s national income is likely to go up by about 2 percentage points this fiscal, said D.K. Srivastava, chief policy adviser at EY India.
The farm sector accounts for about 15% of India’s GDP.
“Rural economy should be more robust this year than normal. I think we should not be carried away by extremely negative assessment of some of the multilateral agencies," said Srivastava. What we need to see is whether growing sectors will offset the impact of the pandemic on the others, he added.
OECD, for instance, estimates a 7.3% contraction in India’s economy in case of a second wave of coronavirus outbreak in December.
Angshu Mallick, deputy chief executive of Adani Wilmar Ltd, the maker of Fortune edible oils, said that demand for fast-moving consumer goods will see a quicker revival in rural markets than in urban India. “Rural migration and the government stimulus are the two key reasons for this. The series of measures announced by the government will help in sustaining demand, while the large-scale migration we have seen from cities to villages during the lockdown will add to the existing demand," said Mallick.
Shuchi Bansal and Amit Panday contributed to this story.
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