At a time when there are fears that an anticipated rainfall deficit due to the effect of El Nino might derail recovery in the rural markets, Sanjiv Puri, Chairman and Managing Director, ITC, said the commodity price inflation is cooling off and that rural demand should start picking up with an improvement in farmers’ incomes on the back of better realisations.
Urban demand, which has been strong across categories, is expected to sustain. However, the only area that needs to be monitored is the external sector or the global demand and its impact on exports, given that globally many economies are under stress, he said.
It is to be noted that the rural demand, particularly for the FMCG sector, remained stressed during the December quarter due to general inflationary pressures and rainfall deficit in some States. However, industry insiders have been talking about greenshoots of recovery in the rural economy on the back of a good harvest season, better realisation and expected spending by the government.
According to Puri, the “worst is behind” in terms of commodity price inflation. The overall crop (situation) is better and is likely to be higher than last year, so realisation in rural areas should be better.
“I think firstly worst is behind us... commodity inflation is cooling off... overall crop is better it is higher than last year... realisation in rural areas should be better. Right now, urban is growing faster but I expect rural to pick up,” Puri told newspersons on the sidelines of a conference on ‘DIGITISE’ organised by CII here on Thursday.
Farm income accounts for nearly one-third of the total rural economy, rural wages account for around one-third while another one-third relates to other incomes. Rural wages are already up according to official data and the investment in infrastructure should provide impetus to the overall growth in rural economy.
“Rural demand to bounce back... urban demand — we are experiencing strong demand across. The only area that is monitorable is the external sector, the global demand wherever there are export linkages because globally, many economies are under stress,” he said.
The effect of El Nino, if any, can only be understood in April-May, however, it is important to be “alive” to the risks of extreme weather events, he added.