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There is a sense of disconnect between the macro economic numbers and the other high frequency data coming in.

Data came in that the private final consumption expenditure for Q3FY19 saw a growth of 8.4% (YoY).

We are talking about growth between Oct to Dec 2018. The festive season. But there has been enough data to prove that the season was very thanda; in fact the wave of cutting down on consumption was seen right since then.

The most hit, in terms of slowdown is the auto sector; blame it on migration to BSVI from BSIV, the fact remains that people are buying lesser number of two wheelers, cars and commercial vehicles. Beginning August, car and two-wheeler demand started dwindling and so did that for trucks due to increase in axle load limit, post which fleet operators postponed their purchases leading to weakness in industry production.

But the real consumption story, that of FMCGs in Q3FY19 had already started showing some signs of the oncoming clouds. HUL and Asian Paints did do well but most others had a mixed bag – ITC and Dabur reported fall in margins, Britannia posted subdued volume growth of 7% and attributed it to post Diwali sluggishness while Marico, Emami and Godrej Consumer Products were below expectations.

Rural India is the main growth driver of the economy. So if this is what propels the consumption story, how was the growth in rural income in Q3FY19? There has been a steady decline in rural income which is reflected in lower offtake in tractors and two-wheeler sales. The Govt’s rural expenditure also continued to contract sharply in year-on-year terms, probably on account of fiscal constraints and some diversion of funds to the farmer income support package. Real wage growth fell from 2.6% in Nov to 2.2% in Dec and to 1.4% in Jan. Govt rural expenditure was at -20.4% in Nov, then at -14.5% in Dec and -57.4% in Jan.

We would say things were still better in Q3 as Q4 story and henceforth has been so good. There is an overall fall in consumption and it continues. Take a look at the realty sector; it’s down all over and that leads to a decline in all ancillary sectors.

And then there is the distress in the NBFC and banking sector. The crisis at IL&FS has dealt a body blow, leading to a crunch in liquidity.

There is no doubt that households have reduced consumption as there is insufficient income growth. Thus in the background of this data, it seems like a tight slap on the face to read the consumption has grown.

Well, maybe after elections, after Q2FY20, we will indeed see a growth in consumption. But for now, things are on a complete hold.

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