After two slow years, rural markets are seeing a resurgence in demand that leaves the urban economy in the dust
WHEN the Narendra Modi government announced the demonetisation of Rs 500 and Rs 1000 notes on November 8, 2016, the Indian rural sector, which was primarily a cash economy, was the worst sufferer. Coming at the end of two years of subdued rural consumption, this hit the sector badly and stymied whatever growth it was seeing. Demand was at its lowest ebb and there was hardly any consumption happening as cash dried up.
A year later, India’s massive rural sector has hit back. In the last two quarters, there has been handsome growth in consumption and demand, and there are signs that this will continue well onto the next financial year. While companies have registered an overall growth of five to ten percent, their rural growth has been in double digits and in the range of 12-15 percent.
Consumer durable companies, fast-moving consumer goods (FMCG) firms and automotive manufacturers have all seen robust double-digit growth in rural areas riding on a sound rural push that has happened in the last several months. This compares favourably to the low single-digit figures for urban areas where growth, if there is any at all, is stagnating. There are clear signs of a rural recovery across the economy.
Demonetisation had dealt a body blow to many industries that had a rural focus. FMCG, which is primarily cash based, saw flat to negative growth in December 2016. Hindustan Unilever Limited (HUL), India’s biggest FMCG company, saw flat growth in December 2016 and low single-digit growth in the following couple of months. According to HUL CEO Sanjiv Mehta, demonetisation was one of the reasons behind the slow growth in rural areas.
This story is from the December 18, 2017 edition of Outlook.
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This story is from the December 18, 2017 edition of Outlook.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
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