Rural Household Consumption Plunges to 7-Year Low: Report

New Delhi: In yet another grim news on the economic front amid the ongoing festival season, rural household consumption plunged to a seven-year low at 7.3% in the September 2019 quarter, indicating the impact of a long-drawn agrarian crisis across the country. In 2018, this growth stood at 16.2% in the same quarter.

As per a report released by Nielsen, a market research company, consumption in packaged consumer goods by rural households also grew at a much slower pace than in urban areas, according to a report the Mint newspaper. Consumption in rural areas rose by 5% in value terms against 20% last year and 8% in urban areas compared with 14% a year ago in the same quarter.

The report confirms signs of growing rural distress, as the same report had showed a pick-up in rural consumption in September 2018, which was 1.4 times higher than urban consumption after being on a par with it 2017, following demonetisation.

In terms of volume, the quarter saw a growth of 3.9% against 13.2% last year.

According to Nielsen, rural India contributes 36% to the country’s overall fast-moving consumer goods (FMCG) spending and usually clocks an average of 3-5% growth every year. 

It may be recalled that the past year has seen farmer agitations and distress following crop failure and damage due to vagaries of the weather. Across states, farmers have been demanding remunerative prices as well as loan waivers. 

The slump in rural consumption growth is also reflective of the immense hardships being faced not only by farmers but also landless wage labour who work on the fields and together account for two-thirds of all rural households in India, says the Mint report.

 “In the last seven years, this is the lowest we are seeing from a rural growth perspective; second is, we have always seen so much potential coming in rural from a commodity to branding perspective that rural always used to outpace urban from a growth point of view. This is the first time around where we are seeing otherwise," Sunil Khiani, head of retail measurement services at Nielsen South Asia, said in an interview in the Mint newspaper.

The ongoing economic slowdown is leaving its imprint across sectors, such as textiles, automobiles, among others, but what has added to the woes of the rural folk is erratic rainfall and drought conditions. This year, 13 states have been impacted by heavy rainfall and flooding, destroying and damaging crops.

According to the Neilsen report, India FMCG Growth Snapshot, the growth in sale per store in rural areas has become one-fourth of what it was in 2018

“Small manufacturers have seen the biggest drop in cumulative distribution growth which has moved from 18 per cent in Q3 2018 to no growth in Q3 2019, while for large manufacturers, the cumulative distribution growth has halved,” the report said. 

Reflecting a varied trend across regions, the report noted an almost flat growth of 1% in consumption volumes in North India in the September 2019 quarter against a high growth of 17% a year ago, according to a Hindu Business Line report.

Earnings of such shops in rural markets grew at 5% in the September quarter compared to the 19% growth they clocked in the same quarter last year, according to the findings of the Nielsen report.

As for the diverging trend in zones, the north market witnessed almost a flat volume growth at 1 per cent in Q3 2019, as against a growth of 17 per cent in the same period last year.

However, the marketing research agency has retained its annual growth forecast for the FMCG market at 9-10%, while cautioning that demand could cool further in the December quarter.

Nielsen tracks consumption of branded FMCG in over 80 categories across urban and rural India.

Modi Govt Callous, Yechury Hits Out

Expressing concern over the plunge in rural consumption growth, even as the number of wealthy Indians is rising, Communist Party of India ( Marxist) general secretary Sitaram Yechury accused the Narednra Modi government of being "callous" on the conditions of farmers while writing off unpaid loans of rich borrowers and tax cuts for the super-rich. 

He lashed out at the Bharatiya Janata Party-led government for being busy in playing “divide and polarise” politics, while ignoring the cries of the vast majority of the poor and vulnerable sections of the society.

"A callous Central government shows no signs of concern over the slowdown tumbling into a much graver problem. There is enthusiasm in Modi govt only for tax cuts for the super-rich and writing off unpaid loans of rich borrowers.  The signs of the prolonged agrarian distress and near-stagnant rural incomes have been there for long. But this govt is busy with trying to divide and polarise," Yechury said in a tweet. 

Yechury added that the Modi government’s policies had hurt all sections of the population, including small traders and enterprises.

"Farmers, landless wage workers, workers in cities, youngsters, women looking for jobs, lakhs of sacked workers in auto, textiles and other sectors, industry workers, small entrepreneurs: it’s an endless list: Modi govt's policies have hurt all sections, except rich cronies," he tweeted. 

Congress leader Rahul Gandhi also attacked the government for being "clueless" about the economy.

"Rural India is in severe distress. The economy has sunk and the govt is clueless about what to do," the former Congress president said in a tweet.

(inputs from PTI)