Falling incomes and longer winter to translate into lower demand for at least some months
The new financial year is not much cheer to companies which generate a large chunk of sales in rural India. Their chief executives say slowing economic growth and falling rural wages are leading to a sharp fall in demand, one that will reflect in the next few quarters.
A longer winter season has delayed offtake of summer season products. A liquidity crisis is also pinching the dealers and wholesalers, unable to stock afresh. Tractor sales, often considered a proxy of the rural economy, have been muted since December; that was after brisk growth in the earlier part of 2018-19.
Says Rajesh Jejurikar, president of the farm equipment sector at Mahindra & Mahindra: “With a CAGR (compound annual growth rate) of 16 per cent in the last four years, the tractor industry has grown from over 500,000 in FY16 to almost 800,000 in FY19. This can be attributed to factors like availability of retail finance, government’s investments in rural and agriculture projects, as well as a good crop on the back of a good monsoon. With this as a backdrop, we expect a single digit industry growth in the next fiscal (2019-20).”
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