Rural demand to remain robust, says finance ministry

Rural economy to get further boost

Favourable agricultural conditions coupled with expectations of a better harvest will likely push rural demand up in the coming months, the finance ministry said in its September economic review, released on October 28.

“Going forward, favourable agricultural conditions, a rise in MSP for Rabi crops, better crop harvest and continued Government support for enhancing rural welfare are likely to spur rural demand," the ministry noted.

The government announced a 3-8 percent rise in the minimum support price of rabi crops earlier this month.

While the monsoon has disrupted the supply of vegetables, affecting inflation, the ministry noted that a normal monsoon will likely improve prospects of a rabi output.

“Above-normal southwest monsoon rains have replenished the reservoirs with live storage, reaching 118 per cent of the corresponding period of last year and 113 per cent of normal storage as of 10 October,” the government noted.

NABARD survey indicates an improvement in outlook as well.

“Rural households are also optimistic about the future, reflected in their positive sentiments on income and employment conditions. More than 50 per cent of the households expect income and employment conditions to improve in the next quarter and during the next year,” the ministry said.

The ministry also noted that urban demand, which has remained muted until now, is likely to be revived.

FMCG sales have moderated in the year's first half, and auto and housing sales have also been muted.

However, the ministry noted that improvement in RBI’s consumer confidence and future expectations surveys indicate a rise in urban economy.

“The ongoing festive season and improvement in consumer sentiments may boost urban consumer demand. However, early indications were not particularly promising,” the ministry noted.