ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Subdued Rural Demand

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The Indian economy is currently witnessing a severe slowdown in consumer demand that has resulted in private consumption expenditure slowing down to 3.1%, the slowest since the last 18 quarters. According to the media reports on the unpublished consumption expen­diture survey report, “Key Indicators: Household Consumer Expenditure in ­India,” undertaken by the National Statistics Office (NSO), the consumer demand fell 8.8% in the rural villages and 2% in the urban areas between July 2017 and June 2018, compared with 2011–12, the sharpest 12-month drop recorded since 1972–73. The survey, the findings of which remain unpublished, also mentioned that the average monthly spending by a person, also known as the per capita monthly spending, fell to ₹1,446 in 2017–18 from ₹1,501 in 2011–12, declining by 3.7% during this period, falling for the first time in four decades, driven primarily by slackening rural demand. As per the survey, rural people bought less of essential food items such as oil, salt, sugar and spices with the exception of milk and milk-related items. It was also highlighted in the survey that the monthly spending on food in the rural areas declined from ₹643 in 2011–12 to ₹580 in 2017–18, a decline of 10% while in the urban areas, it increased from ₹943 to ₹946 during the corresponding period. Consumers across the nation have spent less on food products during this period, which is worrisome. Historically, rural spends on fast-moving consumer goods (FMCG) grew 3%–5% faster than the urban markets. However, during ­recent months, the rural spends have been slowing down at a faster rate as compared to the urban spends.

Rural India comprises 70% of India’s total population of 135 crore people, thereby making it an important economic driver of growth, and 40% of this rural population is engaged in agriculture. The rural incomes have been depressed for quite some time now, which in turn has resulted in rural distress and stagnating consumer demand. Due to a good monsoon in 2019, it is expected that there would be a good harvest of the crops resulting in higher agricultural production, which may lead to lower prices of agricultural produce. As a result, the real incomes of the farmers may not increase. It is worthwhile to mention that the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme can help revive the rural demand to some extent. Under this central sector scheme, an income support of ₹6,000 per year in three equal instalments is provided to small and marginal farmer families. This would aid in raising the rural demand and help in mitigating the rural distress.

An important reason for the fall in prices of agricultural produce is that the bulk of the agricultural trade happens in cash across the country. Since 2017, there has been a ban on cash transactions above ₹2 lakh through the incorporation of Section 269ST in the Income Tax Act. Since 1 January 2019, the Law for the Reduction of Cash Use came into force that imposes limits on the use of cash transactions for businesses and for private individuals. The critical issue is that trading of agricultural produce through electronic transactions is not prevalent among the rural population. As a result, the rural population has started adopting austerity measures, thereby affecting rural demand.

The focus should be on the revival of domestic consumption demand by raising the earnings of the rural population and lower income groups. The government expenditure provisioned for agriculture in the budget should be spent and the requisite funds released swiftly. It would also help if the government makes speedy release of the pending instalments of farmers registered under the PM-Kisan scheme. It is extremely important to increase rural income as consumer demand needs to come from the rural population initially.

Sudip Das

Bengaluru

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