RABI CROPS AND RURAL CONSUMPTION

By Ruma Dubey

For us city dwellers, where pulses and vegetables means going to the market and getting it, what could probably be the significance of rabi and kharif crops? Do they even mean anything to us?

Well, if it does not mean much, it should! Because it is these crops which will decide all the economic data which we track sitting in the comfort of our homes/offices. And it is these crops which will decide the swing of the stock market.

Rabi or winter crops, are sown between October to February and harvested by June. And the most important rabi crop is wheat. On the other hand, Kharif crops are sown during April-July, and harvested by October, with the most important Kharif crop being paddy.

Naturally, based on the timeline, we will now wait and see how the rabi crops have fared. And there is good news on this front. As per data put out by the Ministry of Agriculture, received from states, rabi crops have been sown in 592.02 lakh hectare as compared to 591.56 lakh ha at this time last year. The Government is targeting wheat output of 84 million tonnes, similar to that of 85.95 million tonnes produced last year.

This bodes well for not just the agriculture sector but for the economy as a whole. A rich harvest with normal monsoon means that prices will stabilize and it will make up for the shortfall in the kahrif season.  Wheat prices though as not expected to come down as the govt has announced a much higher minimum support price.

All this in turn means there will be more money in the hands of the farmers and with over 60% of India livening in villages, surely it would means consumerism will once again pick up. The stock market, which is always a few steps ahead of us, has already taken into account this rabi season news. The FMCG sector has shown a sharp spurt today and in the days to come, we could see more spike ups.

Yes, rural consumers today hold the key to the Indian economy. Apart from a good harvest, agriculture wages have never been this good. Till end of September 2012 it was growing at over 20%  and this means, those at the bottom of the pyramid, will show a very strong consumption.  If one may recollect, there was a report put out in August 2012, which showed how rural consumption had outpaces urban consumption. Crisil and NSSO had indicated that consumption expenditure in rural India between 2009-10 and 2011-12 stood at Rs 3,75,000 crore as against Rs 2,99,400 crore by urban India. Apart from the harvest, social schemes like Mahatma Gandhi National Rural Employment Guarantee Scheme and others have provided employment to farmers during lean periods, helping them supplement this agriculture earnings. And what did come as an eye-opener was that more than half of India’s stock of consumer durables and two-wheelers are now in rural India. Bikes, trucks, tractors and cars will see a spike up in demand. Also, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care and hot beverages.

Every company, in the FMCG, auto, consumer durables, are all targeting aggressive marketing drive in rural India. And a rich harvest will surely means richer harvest for these companies. And this in turn means good fortune for those in the stock markets too.

Thus it is not just the farmers who should be happy, we all should be happy and thank the Gods for a bountiful harvest!