The growth in rural demand in H1 of FY25 is backed by an increase in Kharif sowing, a rise in minimum support price for Kharif crops and increased government funds allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme
Union finance ministry’s monthly economic report for September revealed a slowdown in urban demand, particularly due to above-normal rainfall during monsoons. The report released on October 29 highlighted that rural demand has picked up as an increase in sales of fast-moving consumer goods by 5.2 per cent in quarter 1 in the financial year 2024-25.
It also pointed out that favourable agricultural conditions along with expectations of a better harvest might further push rural demands in the upcoming months.
“...rural demand continues to improve, as reflected in increasing Fast Moving Consumer Goods (FMCG) volume sales and a rise in three-wheeler and tractor sales,” said the ministry in the monthly economic report. “However, urban demand appears to moderate due to softening consumer sentiments, limited footfall due to above-normal rainfall, and seasonal periods during which people tend to refrain from new purchases,” the ministry said.
The growth in rural demand in H1 of FY25 is backed by an increase in Kharif sowing, a rise in minimum support price for Kharif crops and increased government fund allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme.
While the trend in urban demand paints a different picture. The volume increase in urban FMCG sales has moderated from 10.1 per cent in Q1 of FY24 to 2.8 per cent in Q1 of FY25. According to FADA, auto sales declined by 2.3 per cent in H1 of FY25, particularly as a result of lower sales in Q2 of FY25 as compared to Q2 of FY24 in urban India.
The report revealed that the overall unemployment rate for 2023-24 remained the same at 3.2 per cent particularly because of the female workforce. Employment in the manufacturing sector showed an increasing trend. The report also found some evidence of artificial intelligence replacing workers and the ministry said that it will monitor the emerging trend in this regard.
The ministry said that the overall growth of the economy is good and predicted the Indian economy will grow between 6.5 and 7.0 per cent in the financial year 2024-25. However, prospects of global factors, including ongoing geopolitical tensions and increasing geo-economic issues, do pose a threat of trade disturbance and its impact on financial markets.
“The outlook for the Indian economy is good, underpinned by a stable external sector, positive agricultural outlook, expected improvements in demand supported by the festive season, and the likelihood of an increase in Government spending, which will boost investment activity,” the report mentioned.
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