Demand trend from India’s consumption driven sectors continue to be muted despite initial opitmism a year ago, says a recent report by Icra. The report which looks at performances of segments like passenger vehicles (PV) sales, gold demand, retail and FMCG paints a rather mixed scenario pertaining to chances of economic recovery in the coming quarters.
According to the Icra study while rising gold demand and passenger sales have largely improved in the the current fiscal compared to the year before, underperformance in retail and FMCG sectors threaten to pull down growth numbers. Decilining demand from the rural sector is listed as one of the biggest factor which could restrict recovery unless there is urgent fiscal intervention to contain the damage. Fiscal measures such as implementation of seventh pay commission, OROP, hike in MSPs and relief initiatives for drought-hit states among others could play a crucial role going forward, the report adds.
According to the study domestic passenger vehicle and retail Jewellery sales have improved in the current fiscal. Domestic passenger vehicle sales have grown by 8.9% so far in FY 2016 compared to a growth of 3.9% in the previous fiscal.
Similarly gold consumption too is up by 4% compared to the previous year. ICRA says that that the recovery in the PV sales is primarily supported by slew of new model launches and softening interest rates as well as aggressive sales promotions by car companies. Similarly, gold demand is up owing to low-base effect and soft prices due to lifting of mandatory export restrictions.
In contrast, while FMCG sector has reported overall stable sales volumes so far but many FMCG companies have reported decline in rural sales owing fo poor monsoons this year. Again in other segments like alcoholic beverages, retail chains and quick service restaurants the numbers give out mixed signals due to complex regulatory and business environment. For retail chains growth remains stable across non-discretionary formats but onslaught of e-commerce platforms have clearly made a dent in the sales of conventional stores.