Companies

Rural to the fore, as cities continue to grapple with Covid-19

Murali Gopalan Chennai/New Delhi/Mumbai | Updated on June 29, 2020 Published on June 28, 2020

Tractor-makers have showed relatively better sales numbers despite lockdown   -  The Hindu

Booming agriculture, higher farm incomes offer auto/FMCG-makers more than a ray of hope

Amidst all the doom and gloom with the Covid-19 overhang, rural India promises more than a ray of hope for manufacturers.

The first indications came through in auto sales data for April when cars and two-wheelers drew a huge blank with the lockdown in place, but tractors showed relatively better numbers.

Clearly, rural India is in a better space than its urban counterpart which has its back to the wall battling Covid-19. Be it Chennai, Mumbai, Delhi or Kolkata, cities are in a state of near paralysis.

Small wonder then that manufacturers of cars, two-wheelers, tractors and fast moving consumer goods (FMCGs)have turned their attention to smaller towns. Agriculture is booming, thanks to a positive outlook for the monsoon and higher farm incomes fuelling greater spend.

“For farmers, the real currency is their crops. Tractors play a very important role in their life to enhance productivity from land,” says Raman Mittal, Executive Director, Sonalika Group.

In his view, the rise in foodgrain production coupled with a favourable monsoon outlook and the Centre’s growing support to agriculture augurs well for tractor demand in rural markets.

Mittal also believes that major wheat-growing States such as Punjab, Haryana, Uttar Pradesh and Madhya Pradesh will contribute significantly to bumper production and better income for farmers. Additionally, States that grow paddy like UP, Andhra Pradesh, Telangana, West Bengal and Odisha as well as Karnataka & MP are expected to see a rise in demand.

Move on to cars and the sentiments are pretty much in line except perhaps for a greater sense of caution. According to Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki, these are still very early days.

Yet, he admits that there is no denying that the impact of Covid-19 “looks a little less” in rural geographies when compared to bigger cities. Recovery in the rural markets looks a “tad better” thanks to a bumper rabi harvest while the kharif crop has reported 13 per cent higher sowing.

 

Rural infrastructure

“With the Centre’s focus on improving rural infrastructure, we expect more demand from these areas,” says Srivastava whose company’s rural sales component last fiscal was nearly 40 per cent. “Having said that, these are early signs and we must observe the markets for a few more months to derive any conclusions,” he cautions.

Go further down the mobility ladder to two-wheelers where TVS Motor Company is quite upbeat about growing demand in rural markets for motorcycles and mopeds. In today’s new normal of social distancing and a preference for personal mobility, the company believes that two-wheelers will play a pivotal role. This evolving pattern, coupled with a good monsoon forecast, will lead to “positive sentiments” for two-wheelers in rural India, says a spokesperson.

Beyond the automotive arena, FMCG makers are as upbeat about prospects beyond the big cities which are still grappling with the growing virus infections. Sunil Kataria, CEO, India & SAARC, Godrej Consumer Products, says all the good news is coming in from rural demand which is outpacing urban by a “significant margin”.

As he explains, agriculture was “practically unscathed” from the pandemic and this has helped keep rural demand in a “better place”. “Reverse migration from urban is likely to create additional demand in the near future,” he adds.

Income gap

According to Saugata Gupta, MD & CEO, Marico, there will be a huge impact on middle and bottom income following Covid-19. “The urban bottom of the pyramid will be far more impacted than rural. If the harvest is fine, rural (demand) will be much more in control while urban will be far more impacted.”

Ullas Kamath, Joint Managing Director, Jyothy Labs, sees a remarkable turnaround in rural India where demand pre-Covid was “very, very slow” for almost six quarters in sharp contrast to the bigger cities.

Post-Covid, there has been tremendous migration from urban to rural areas which will lead to more consumption. “So there will be a double positive impact because the number of people who have gone back to rural is much higher than what it was in the past. Consumption will go up to that extent,” says Kamath.

In his view, rural off take will be “really robust” from the second quarter. “The growth engine has to be rural for the remaining three quarters,” he insists.

(With inputs from G Balachandar, S Ronendra Singh and Nandana James)

Published on June 28, 2020
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