New Delhi: Rural consumption experienced a mere 0.5% year-on-year growth in the second quarter of fiscal year 2024, marking the slowest pace in eight quarters, a new report has said.This contrasts with urban consumption, which grew 7.4% in July-September 2023, the highest rate in four quarters.According to an analysis by Motilal Oswal Financial Services (MOFSL), the tepid consumption scenario in rural areas was mainly led by sharply deteriorating reservoir level, the first fall in two-wheeler sales in six quarters, and first contraction in fertilizer sales in seven quarters.Tractor sales also decreased for the second consecutive quarter, coupled with a decline in real farm exports for the fourth straight quarter, the Financial Express said, citing the report.“Our analysis is also supported by the MGNREGA (Mahatma Gandhi Rural Employment Guarantee Act) data. Employment demand by households under MGNREGA was much higher in the first seven months of FY24 compared with FY23 and FY18-20 average,” the agency said, as per the newspaper.Around 22 million people demanded employment under MGNREGA each in September and October, 10-18% higher than in the corresponding months of FY23, and 26-31% higher than the pre-COVID period, said the report.HDFC Bank’s economist Swati Arora told the business daily that uneven monsoon led to crop damage, which weighed on rural consumption. She added that higher inflation added to the woes and also weighed on discretionary spending.She said that the gap between rural and urban demand is likely to reduce in Q3 FY24. She told the newspaper that pre-election revenue spending (such as LPG Price cut, fertiliser and LPG subsidy, and extension of free food grain programme) bodes well for rural consumption.MOFSL’s chief economist Nikhil Gupta told FE that “with five state assemblies going into elections over the next month and general elections scheduled in May 2024, the hope of a revival in the rural sector is alive.”
