1. Upturn in rural incomes set to boost private consumption above 8%

Upturn in rural incomes set to boost private consumption above 8%

The upturn in rural incomes should push private consumption above 8% in fiscal 2017, compared with 7.4% in fiscal 2016, according to an analysis by CRISIL.

By: | Published: October 3, 2016 6:30 AM
Rural employment, Drought, MNREGA, Lok Sabha

Although the larger agricultural output will help boost supply and exert downward pressure on prices and farm incomes, the ratings agency feels agriculture would nonetheless get a big boost. “

The upturn in rural incomes should push private consumption above 8% in fiscal 2017, compared with 7.4% in fiscal 2016, according to an analysis by CRISIL. The recovery in consumption, the ratings agency believes, will be two-legged driven both by a revival in rural incomes following from a favourable monsoon and healthy consumption in urban areas.

Although the larger agricultural output will help boost supply and exert downward pressure on prices and farm incomes, the ratings agency feels agriculture would nonetheless get a big boost. “We estimate that on balance, even with a fall in food prices, the output effect will weigh in and raise agricultural GDP by R1.49 lakh crore this fiscal,” Dharmakirti Joshi, chief economist, CRISIL, observed. In fiscal 2016, the increase in agricultural income was R97,800 crore.

rural

Indicators in rural markets, which account for 54% of private consumption in India, reveal green shoots and the recovery is likely to gain strength in the coming months. Moreover, a visible spurt in construction works, especially roads, is likely to raise non-agricultural rural incomes. The length of roads completed —both new connectivity and upgradation– under the Pradhan Mantri Gram Sadak Yojana (PMGSY) so far this fiscal is higher compared with the same period last year. Meanwhile, urban consumption remains healthy and will benefit further from lower inflation, spillovers from robust agriculture activity in manufacturing and services, greater transmission of past interest rate cuts, and the Seventh Pay Commission and One Rank One Pension payouts.

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