Rural consumption slowed down due to rise in Covid cases, lockdowns


Rural consumption slowed in financial year 2021, largely due to a rise in the number of Covid-19 cases in rural areas and consequent lockdowns, according to a report by Motilal Oswal Institutional Securities.

Balram Singh Yadav, Managing Director, Godrej Agrovet, was quoted as saying that the surge in agri-commodity prices is expected to be corrected shortly – as prices are not sustainable at this level (15-20 per cent decline may be expected) and reflect the change in global prices. Cereal prices are expected to remain elevated on increased demand from the Bio-Diesel segment.

Yadav said rural consumption slowed in FY21, largely due to a rise in the number of COVID cases in rural areas and consequent lockdowns.

The Central government has introduced various initiatives to revive rural demand, such as subsidising all the fertilizers (namely urea, DAP, and P&K).

Another Rs 190 billion has been allocated to 95 million farmers under the PM Kisan Samman Nidhi, of which 45 million farmers have received the funds. The drop in consumption is expected to be temporary, and demand is expected to bounce back faster than expected, he added.

India’s domestic sector saw a bumper rabi season, thereby paving the way for robust growth in FY22. Food grain production for the year is expected to be north of 307 mmt.

Sameer Goel, Managing Director, Coromandel International was quoted as saying that as of April, the Food Price Index posted a rise for the 11th consecutive month and was at the highest levels since May 2014.

Growth was largely driven by vegetable oils and cereals, lower output and decline in inventory levels, and stockpiling in China. The monsoon forecast for CY21 remains normal, and reservoirs in South and West India are at good levels; these factors bode well for acreages.

As per the World Bank, prices in April increased 83 per cent YoY for maize, 64 per cent YoY for soybean, 76 per cent YoY for palm oil, 58 per cent YoY for sugar, and 43 per cent YoY for cotton.