With a lower number of coronavirus cases in rural India, demand pickup has been better than urban India according to many companies that have reported their first-quarter results. The manufactures of Good Day biscuit, Britannia, reported Rs 3,384 crore in revenue generated from sales in the first quarter of current FY up from Rs 2,677 crore in the same period last year. Vikaas M Sachdeva, CEO, Emkay Investment Managers says that for India to develop, there has to be a stabilized growth. The growth does not necessarily have to be equal every year. In certain periods, there is high urban demand and the rural demand is less because of a variety of factors and sometimes it is the other way around.
It is not just the FMCG sector that is witnessing rural India’s growth. Maruthi Suzuki, the automobile manufacturing company, recently said that demand from rural India is better than urban. HDFC Bank’s Aditya Puri in the conference call with market participants said that the rural economy has been isolated from the virus and good harvesting of Rabi crops has helped maintain demand. On the other hand, Bajaj Finance, the NBFC company saw moratorium assets under management (AUM) for the rural B2B segment declined in the first phase of the moratorium from Rs 690 crore to Rs 210 crore in the second phase. In the telecommunication sector, Bharati Airtel said that the company witnessed a shift in traffic from urban to outskirts and rural areas and from offices to residential areas, along with a surge in data demand.
What’s fueling growth?
The head of global growth markets at Barclays Private Bank, Salman Haider, said that a major part of the government’s economic package is to aid the rural economy. The major aim is to increase the disposable income levels of rural households, get spending going. Government support to the rural has ranged from grain transfers, direct cash transfers to women using Jan-Dhan accounts, increased crop procurement, PM Kisan payments, and increased allocation for NREGA.
Can it sustain
The global wealth manager while acknowledging the government’s fiscal support, highlighted that India’s general government expenditure-to-GDP ratio is among the lowest in the world, a reflection of the low tax-to-GDP ratio.
Salman Haider says even if the rural recovery sustains, a stronger rural sector can only reduce the current economic damage caused by the crisis but not offset it.
