Rural demand might rise thanks to good rabi harvest and high mandi prices for crops
In an interview to CNBC-TV18, Akshay D'Souza, Chief-Growth and Insights at Bizom; K Ramakrishnan, MD-South Asia World Panel Division at Kantar and Sachchidanand Shukla, Chief Economist at Mahindra Group discussed the state of rural demand at length.
Has rural India's consumption increased? The big question in Q3 was whether things had improved in rural consumption since a large portion of consumption had been negatively impacted by inflation. But now with better rain and perhaps the ebbing of inflation, have things gotten better in rural consumption?
In an interview to CNBC-TV18, Akshay D'Souza, Chief-Growth and Insights at Bizom; K Ramakrishnan, MD-South Asia World Panel Division at Kantar and Sachchidanand Shukla, Chief Economist at Mahindra Group discussed the state of rural demand at length.
First up, Dr. Shukla said that mandi (big wholesale market where crops, vegetables and other items are sold directly by manufacturers, farmers at a fair price, generally in bulk) prices for most key crops are higher than minimum support price (MSP) and that bodes well for farm economy.
“Mandi prices for most key crops are higher than MSPs, which means more incomes and therefore, the ability and willingness of the farmer or people on the rural side is going to be positive,” he said.
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Talking about shrinkflation, Ramakrishnan said an 8 percent shrink in average grammage drop is seen in rural. However, an early sign of momentum is building in rural area. According to him, a good rabi crop will aid rural demand.
“The number of trips that a household is making to a store to purchase has gone up. So, the way the rural consumer is managing is going more often to the store but getting lesser units per trip,” said Ramakrishnan.
However, D'Souza expect a rise in rural consumption once inflation cools off. He said, “The whole food insecurity, inflationary costs are impacting rural consumption, but as we see inflation soaking down over the next 2-3 months further, we will start seeing a rise in consumption for them.”
According to Kantar Worldpanel Survey, Urban growth is back after being hit by inflation in first half of 2022 and rural shows some signs of growth, but too early to conclude. As per Bizom December 2022 survey, consumers continue to buy conservatively post Diwali. However, demand for branded commodities and home care products is steady.
For the entire discussion, watch the accompanying video
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