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Jan 09, 2013, 11.33 AM IST | Source: CNBC-TV18

Rural consumption and input cost rising: CII

Ajay S Shriram, vice president, CII and chairman & senior MD, DSCL says, that rural consumption is rising but in addition to it the input costs are also rising.

Ajay S Shriram, vice president, CII and chairman & senior MD, DSCL says, that rural consumption is rising but in addition to it the input costs are also rising. He feels that rural consumption to surge going ahead. He is also of the view that it will be tricky to add fertilizer subsidy to the scheme.

Below is the edited transcript of his interview to CNBC-TV18.

Q: What is your view on rural consumption? You have a pulse on what's happening with rural consumers. What is your sense about 2013? Do you believe the rural consumption story will continue to be robust?

A: The rural consumption is moving up. The minimum support price (MSPs) over the year had been going up. Similarly, the National Rural Employment Guarantee (NREGA) scheme is giving surplus money to people in rural India. So, overall the rural consumption is going up. But one must keep in mind that input costs are also going up for farmers, whether it is daily labour costs or input cost of fertilisers. These things are also impacting. But overall, rural consumption is a positive trend and one expects that to continue moving forward in the years to come.

Q: NREGA was the big ticket idea of the UPA 1 and for UPA 2; the big idea seems to be the cash transfer scheme. It is starting off on a much smaller basis. Do you believe this is going to be a game changer in its present avatar which does not include fertilizer, kerosene and food at this point in time?

A: I think it's a very positive initiative. If one looks at it, the leakage which happens in the existing system of giving subsidies to those who need it, the leakage is fairly large and that has been proven by many economists and politicians over the last many years. The need for getting money directly in the hands of the beneficiaries is a great idea.

I think it should be started by simple items like food or education scheme or scholarships or similar things. Fertilizer is a little trickier because approximately 30-40% of the land is not dealt by the owner. It is given on rent. If one sees, the crop patterns are different, the weather patterns are different. So how much fertilizer is needed for which soil condition in which state - these are issues which have to be sorted out to really make it effective.

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