We cover the ban on rice exports in today’s edition here and here. If the government tilts too hard towards protecting consumers and cracks down on prices, through measures such as export bans or stock limits or even imports, then farmers may not earn as much. Also, a farmer’s gain can become a consumer’s pain. If prices are high but the crop is laid waste by adverse weather, then the total gains may not amount to much. Will farmers actually get higher prices or will the middlemen pocket it? Will small industries make a sustainable comeback to create employment opportunities? The government’s thrust on infrastructure creation has continued to be a key source of employment.īut there’s many a slip between the cup and the lip as long-time observers of India’s rural economy might tell you. There is the possibility that rural labour seeking employment in industry may find more opportunities. That smaller companies are returning to the production fold may be visible in other industries as well, which had earlier got scalded by inflation and rising interest rates. And, the government’s food subsidy programme can still take care of the most vulnerable in rural areas. Still, a part of the farm economy may be in better shape. That does leave those who work on farms, but don’t have a right to the produce at risk, however. They are protected from food inflation because they grow what they need to eat. What this means is that a part of the rural economy-which tills land-could be in better shape because of higher realisations, while falling inflation in other products benefits their household budgets. Global trends are partly to blame for these price increases. Prices of dairy and some pulses have risen as well. Wheat prices too continue to remain higher. But rice prices have spiked ahead of the kharif season and that’s sparked a ban on exports. If this had happened post-harvest, then it’s mainly the traders who benefit. These are all inputs for farmers.īut cereals such as rice and wheat, which are grown domestically, have turned expensive. Fertilisers have turned cheaper, so it’s easier for the government to ensure availability. Edible oils, which are largely imported, have become cheaper. That too could explain why the overall market’s sales are increasing.Įven in the decline in inflation, consider the mix. Their return means more cheaper products are now available for rural consumers to buy. If you add high interest rates to the mix, the credit periods they have to extend to the trade, then the inventory cost itself could have made their business unviable. They had exited the market due to high inflation. Their sales in categories such as tea and detergents were much higher than that of the larger players. For instance, in trying to explain why it did not do so well despite price cuts, HUL explained the return of smaller companies-could be regional, local players-to the market. Product availability may have improved, too. Second, the money saved in consuming essentials such as edible oils and soaps becomes available to spend on other items. The packets they buy for the same price now contain more volumes, because companies have increased the fill rate for fixed price packs (like the Rs 2/5/10 packs). Consumers switch back to their earlier consumption patterns, as products become more affordable. These are mainly on the back of a continued softening in the prices of edible oil and crude oil from their peak levels. Along with this, other less essential items have become cheaper too. What could be the reasons for rural India’s improved prospects? One reason, for sure, is the fall in prices of FMCG products ranging from edible oils to soaps to detergents, all daily items of consumption. It raises the prospect of whether FY24 could be the year of a rural recovery, for the FMCG sector surely but for other consumer sectors as well. While this growth may be partly due to a low base effect, as the year-ago quarter saw a decline, it’s still better than if the decline had continued unabated. It rose in the June quarter by around 2 percent, after declining in all of FY23. But a silver lining from its management commentary, not just for the company but for the industry and even the country, is a nascent recovery in India’s rural FMCG sales growth. Hindustan Unilever’s shares on Monday continued to underperform due to its disappointing June quarter results. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of. The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |