Monsoon uncertainty weighs on gains from lower oil prices
Monsoon uncertainty weighs on gains from lower oil prices MUMBAI: Oil prices have tumbled enough for some analysts to lower India’s headline inflation forecast for
Monsoon uncertainty weighs on gains from lower oil prices MUMBAI: Oil prices have tumbled enough for some analysts to lower India’s headline inflation forecast for the fiscal year, but uncertainty over the trajectory of monsoons is nudging consumer firms to temper their growth expectations.Companies with a wide footprint are hoping that a diversified product portfolio will help them offset some of the losses stemming from an expected slowdown in rural consumption. Broadly, the consensus is that discretionary spending in rural areas will likely take a hit, but the progress of rains will be key to determining the extent of the impact.To give some context, rural India contributed nearly 60% to the country’s overall consumption growth as of 2022-2023, said Dharmakirti Joshi, chief economist at Crisil, citing household consumption expenditure data.
Monsoons this year have had a delayed arrival, and rains have been around 43% below normal so far, threatening kharif crop sowing.In Mumbai, where monsoons hit late June, the second-most-delayed onset on record, authorities have imposed cuts on water supply to commercial establishments. “Rural consumers may adopt a more measured approach towards non-essential spending until there is greater clarity on rainfall distribution and the progress of the crop season,” said Mayank Shah, chief marketing officer at Parle Products.Afresh flare-up in the West Asia region over the weekend could roil macro-sentiment, hurting prospects of longterm peace.
“Any pressure on farm output and earnings is likely to weigh on rural consumption, with broader implications for FMCG demand and growth,” said Piruz Khambatta, chairman at Rasna Group, which has recorded strong sales of summer products on the back of late onset of showers.While some degree of caution may be observed until rainfall patterns stabilise, rural consumption has historically demonstrated resilience when monsoon conditions improve over the course of the season, said Kaleeswaran Arunachalam, group CFO, Crompton Greaves Consumer Electricals.Development of El Nino conditions could potentially disrupt rural demand, impacting revenues of a large section of the corporate sector, which posted a healthy revenue growth in Q4FY26, said Icra.
Growth rates may vary across rural regions depending on monsoon performance, said Jyotiroop Barua, business head, confectionary, at DS Group.
The BriefWire