Unpacking Q4: With green shoots visible, will FMCG stocks finally pick up pace?
India & Bharat ‘Rural India’ is an excessively elastic term which encompasses everything from the prosperous villages in Tamil Nadu’s industrial belt to water-starved hamlets of Vidarbha and Marathwada. But the vast heterogeneity notwithstanding, rural India has been reeling under some setback or the other for the past few years, from the demonetization of 2016 to the NBFC (non-banking financial company) liquidity crisis in 2018 and finally the hammer blow of covid-19 in 2020. A recovery in the farm sector, therefore, has been keenly awaited by both policymakers and corporate India.
The March quarter delivered just that, with rural demand outpacing that of urban markets for the first time in 15 months. According to market research firm NielsenIQ (NIQ), urban markets saw a 5.7% year-on-year (y-o-y) rise in demand in the three months to March. In contrast, rural demand vaulted by 7.6%.
“In the last two years there has been significant inflation which has impacted rural and lower-income households to a greater degree. However, higher-income households have been resilient through that period. As inflation is moderating, gradually the demand environment is returning to normalcy," Siddhant Chhabria, research analyst and fund manager at Mirae Asset Investment Managers, told Mint.
“Volumes are coming back in rural on a low base... Additionally, few indicators are showing signs of improvement in demand outlook, like the RBI consumer confidence survey (multi-year high currently), lower MNREGA demand in recent periods (implying better wage opportunities elsewhere) and positive monsoon outlook," he added. MNREGA or the Mahatma Gandhi National Rural Employment Guarantee Act gives legal guarantee of wage employment for 100 days in a
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