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07 December, 2021 20:34 IST
Rural consumption weakens in 2QFY22: Motilal Oswal
Source: IRIS | 24 Nov, 2021, 05.46PM
Rating: NAN / 5 stars.
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After double-digit average growth in 1HCY21, rural consumption finally lost steam last quarter. Most indicators used to determine the trends in rural consumption contracted in 2QFY22, with double-digit growth in only one indicator - farm credit. In contrast, urban consumption grew in 2QFY22, partly offsetting the losses seen in 1HFY21.

Overall, after growing at an average of 6% in FY20/FY21, rural consumption grew 1.6% YoY in 1HFY22. In comparison, urban consumption grew at a strong 16% YoY following average decline of 1.1% in the previous two years. Compared with FY19, both rural and urban consumption are up 14%, stated Motilal Oswal Institutional Equities.

However, urban consumption was 11% lower v/s the counterfactual scenario (no-COVID trend), while rural consumption was just 3% lower. Further, lower government rural spending, and weak rural wages do not inspire confidence regarding improvement in the rural sector, it added.

"Although the deterioration in rural consumption growth is surprising, there are high hopes for the festive season. It would thus, be important to compare the actual improvement in economic activity vis-à-vis expectations," the broking firm said.

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