1. See 90-bps monsoon boost to consumption led by rural areas

See 90-bps monsoon boost to consumption led by rural areas

Rural incomes are set to surge on best monsoons in 3 years and boost consumption, which is expected to rise by about a percentage point to 8.3 per cent, says credit rating agency Crisil.

By: | Mumbai | Published: October 3, 2016 11:19 AM
The agency said half of the 33 per cent districts having deficient rainfall this year have good irrigation facilities, while many others are not important from an agricultural perspective. (Reuters) The agency said half of the 33 per cent districts having deficient rainfall this year have good irrigation facilities, while many others are not important from an agricultural perspective. (Reuters)

Rural incomes are set to surge on best monsoons in 3 years and boost consumption, which is expected to rise by about a percentage point to 8.3 per cent, says credit rating agency Crisil.

“This time around, the consumption story will have two legs instead of just the urban engine on which it has duked out in the past two years. We see private consumption rising 0.90 per cent to 8.3 per cent this fiscal,” Crisil chief economist Dharmakirti Joshi said in a note today.

The agency said half of the 33 per cent districts having deficient rainfall this year have good irrigation facilities, while many others are not important from an agricultural perspective.

“The despondency of the past two monsoons has given way to sanguinity,” he said, adding that rural incomes will push the demand for automobiles and consumer durables.

The Meteorological Department had for this year predicted normal Southwest monsoons, crucial for large parts of the country.

Authorities had announced last week that the season ended with 3 per cent deficiency in rainfall, which is classified as normal.

Joshi said the situation this year is better than the previous two years, which witnessed 49 per cent and 46 per cent of the districts reporting rainfall deficit.

The higher rainfalls, which has led to better water levels in reservoirs across the country, will also help the upcoming Rabi season or the winter crop, he said.

But, despite its expectations on the rise in consumption, Crisil maintained its projections on GDP growth (7.9 per cent this year), farm growth at 4 per cent and the average inflation for the year to trend at 5 per cent.

The report said rural incomes will grow despite the downward pressure on prices and farm incomes, primarily on increased output. Farm GDP will rise by Rs 1.49 trillion (Rs 1.49 lakh crore) this fiscal year as against Rs 978 billion (Rs 97,800 crore) in 2015-16.

Of the overall consumption, rural markets growth will go up to 8 per cent from 7.4 per cent, while the already “healthy” urban markets will continue on its performance on factors like lower inflation and 7th Pay Commission award.

The agency said consumer durables, fast moving consumer goods and auto including tractors will benefit from the rise in consumption.

Southwest monsoons officially ended on September 30 with “normal” rainfalls this season belying the initial forecast of “above normal” precipitation.

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