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Good rains to boost sales of cars, TVs

business Updated: Jul 23, 2013 23:15 IST
Mahua Venkatesh

Finally, there’s some good news for the Indian economy. The bountiful monsoon expected this year may result in a 30% spurt in agricultural loans.

If, as predicted, this leads to a bumper harvest, it could set off a rural boom and boost the sales of auto, consumer durables, FMCG and other companies that now get 20-40% of their sales from rural India. And this, in turn, could offset some of the effects of the slowdown.

“Agriculture is the only strong engine of growth this year as industry and the services sectors are likely to remain weak. A good performance in the farm sector could provide some cushion to our policymakers,” said DK Joshi, chief economist, Crisil.

“For the first time in over a year I am hearing something positive,” said Rajiv Bajaj, managing director, Bajaj Auto. “It (good monsoon) is definitely a good thing as sentiment is positive for the festive season, which was not the case last year.”

Though a healthy growth in the agriculture sector, which accounts for 14% of India's GDP, may not push overall economic growth up by much, it will definitely provide a cushion as the final numbers could have been worse without good rains.

"If the agriculture sector registers over 3% growth in the current fiscal, which it did in 2011-12, it would have a sobering impact on GDP and that is critical in the current scenario," Soumya Kanti Ghosh, chief economic adviser, SBI said.

Car, consumer durables and FMCG companies are looking forward to rising rural sales to offset the sluggish demand in the big cities.

“The good monsoon has brought lot of hope in the FMCG industry. We are expecting a strong surge in demand from rural India. Then, a good monsoon may help overcome the pessimism in the market,” said Adi Godrej, chairman, Godrej Group.

“We expect a robust growth our sales from rural areas,” added Sanjay Chitkara, head, corporate marketing, LG India.

(With inputs from Vivek Sinha, Himani Chandna Gurtoo and Sumant Banerji)