Rural Resurgence: Household Consumption on the Rise
Household consumption is poised to rise in the coming quarters, led by rural areas, thanks to softened inflation and government welfare. A Swiss brokerage highlights improved crop outlook and policy changes aiding urban demand. However, a full recovery remains uncertain, with disparities within rural consumption patterns.
- Country:
- India
The prospect of household consumption picking up steam over the next two to three quarters appears promising as rural areas show strength, according to UBS Securities. The Swiss brokerage asserts that various factors, including softened inflation and a USD 20 billion social welfare expenditure directed towards women, are likely to boost rural consumption significantly.
While rural engagement gains momentum, UBS's chief India economist Tanvee Gupta Jain cautions against expecting a swift, wide-ranging recovery in household consumption. Presently, rural consumption still constitutes less than half a percentage share of the overall consumption, she observes. Nonetheless, slightly ameliorated inflation and better crop outlook owing to favorable monsoons present bright spots.
Urban consumption also instigates optimism, primarily due to RBI's rate cuts and USD 10 billion of policy stimulus. However, in the June quarter, urban demand indicators like passenger car sales showed a sequential decline. The impending USD 55 billion government employee payout, tied to the eighth pay commission recommendations, is anticipated to support urban demand in the near future.
(With inputs from agencies.)
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