Rural demand revival: What new data tells us
Mint delves deeper. Not yet. Hindustan Unilever posted a flat profit in Q2FY24 compared to same period last year.
Marico and Dabur have offered a not-so-upbeat result update for the second quarter. All of them blamed the continuing sluggish rural demand for their poor show. A recent study by NielsenIQ put rural demand in Q2 at 200-300 basis points lower than urban demand.
However, Nestle India registered a 36% jump in profit in the second quarter of FY24 while ITC’s profit grew 6%. Experts attribute their better show to Nestle’s predominantly urban focus and a strong show by ITC’s cigarettes and hotels business. Rural demand was hit hard by the second wave of the covid-19 pandemic.
It never really recovered from there. Unseasonal rainfall in the first quarter of 2023-24 resulted in significant crop damage and lower output. In the second quarter, the erratic monsoon hurt crop sowing.
Add to that higher inflation which meant costlier food and other essential items. In fact, rural inflation in September 2023 was higher at 5.33% than urban inflation of 4.65%. Hit by higher costs and lower income, rural consumers held back their non-essential spending, delaying further the revival in rural demand.
It grew 7.5%, driven by urban demand. Consumers in cities spent, confident of their future. The Reserve Bank of India’s consumer confidence index touched a 4-year high in September.
RBI data showed rising household liabilities as consumers borrowed and splurged. A NielsenIQ study shows a 10% urban volume growth as against rural’s 7% in Q2FY24. The bulk of India lives in rural areas.
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