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Revival in Rural Market On the Cards?
Thu, 25 Feb Pre-Open

The demand from rural India has been dull. Going by the recent financials of top FMCG companies and the two-wheeler sales data, it does give the sense of the prevailing subdued sentiments in rural parts of the country. Two-wheeler sales have gone up by just 1% over the past year. Same goes for tractor sales, which is another good economic indicator for demand in rural India. Tractor sales are down by about 13% over the past year.

Going by the managements of leading FMCG companies, historically growth from rural markets has outpaced that of urban markets by 1.5 to 2x. Of late, trend has changed, with both markets growing at the same pace.

To revive sentiments, what becomes essential is job creation. More the jobs, the more will be earned and thus, the more will be spent.

A factor that could revive growth...

The scheme that promises 100 days of employment to every rural household - the 'Mahatma Gandhi National Rural Employment Guarantee Scheme' (MGNRE), is one among many factors that could help lift sentiments.

Turns out that the scheme recorded its highest enrolment in the quarter ended December 2015 over the preceding five years. The quarter witnessed a 46.1 crore person-day of employment generated under the scheme. This figure has doubled as compared to a year ago, a significant increase indeed. Not to mention that a year back, the government was mulling scrapping this policy.

Significant changes are believed to have been made to the scheme which has led it to become popular. One key change is timely dispatch of wages. Earlier, there were a lot of delays in the deployment of funds by the central government to the states for this scheme. However, this matter has largely been resolved. This is evident in the latest figures, wherein proportion of delayed payments beyond 15 days fell to 53% from 72% in FY15. Though, there is still a vast scope for the improvement in this figure by implementation of automation and technology.

Will this aspect be enough to spruce up demand in rural parts of the nation? Well...it remains to be seen. It must be remembered that there are other factors that impact rural consumption. The monsoons for instance. India has passed through two years of deficit rainfall. And from what we have been reading, a lot of hopes are being put on the rain gods to deliver this year.

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