The Hindu Business Line : Farm loan waiver may fuel demand for consumer goods

Mumbai, March 1 Farmers need not worry about loan recovery agents of banks knocking at their doors—at least for the time being— thanks to the Union Finance Minister, Mr P. Chidambaram’s Budget gift to them. Instead, they may have another set of people flocking to their homes—salesmen of different FMCG, consumer durables and home appliance makers.

Opening up

A section of these manufacturers, including some of the big names of the industry, are evaluating the prospects of the rural market opening after the increase in the purchasing power of farmers after debt waiver and relief.

A majority section of the industry believes that it is worth sharpening its focus on the vast untapped rural market for a wide range of consumer products after the Budget proposal.

The total value of overdue loans being waived is estimated at Rs 50,000 crore, while the one time settlement relief on the overdue loans is pegged at Rs 10,000 crore.

Mr. Neeraj Chandra, VP & Head of Marketing, Sales & Innovation, Britannia Industries, said: “As the there will be no pressure on re-payment of loans and the payment schedules will no longer be a factor for rural consumers, they will tend to spend on consumables and durables. There will be a difference in the spending patterns of the rural consumers.”

The Union Finance Minister, Mr. P. Chidambaram, said in his Budget speech that “upon being granted debt waiver or signing an agreement for debt relief under the OTS, the farmer would be entitled to fresh agricultural loans from the banks in accordance with the normal rules.” Mr. Shekhar Bajaj, Chairman and Managing Director, Bajaj Electricals Ltd, agreed that the debt waiver scheme might boost sales of certain products, like home electrical items, in the rural markets.

Boost rural economy

Mr. Sunil Duggal, CEO, Dabur India, said: “The Finance Minister’s decision to put agriculture and the farm sector on the centerstage will surely boost the rural economy and improve demand, which will foster growth for FMCG companies.

Mr. Bharat Patel, Chairman of P&G, said: “In the rural market, there will be a multiplier effect and there will be demand for the basic FMCG categories like soaps and detergents, rather than high-end categories like shampoos. With Government’s policy on rural employment generation, there will be more money spent on such FMCG products.”

Mr. George Menezes, Chief Operating Officer, Godrej appliances, said: “There is credit penetration in the rural market made possible by bodies such as NABARD. While this is more towards supporting farmers to make investments into agriculture it might indirectly help in the purchase of consumer goods.”

More Stories on : Budget | Farm credit | Consumer Electronics

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