Almost a third of India is under “severe financial stress” and consumers are finding it difficult to manage their expenses though inflation has eased, said a report on Friday, adding the rural market was a “bright spot”.
“Inflation might have slowed down to acceptable levels, but its effects are not lost on the consumer,” said consumer research firm Kantar’s FMCG Pulse report, adding that the average shopper spent 18 per cent more in the quarter ending March 2024, compared to two years ago in the quarter ending June 2022.
Groceries are the biggest household expense, comprising more than 24 per cent of all quarterly expenses. Spending on household goods has increased by 19 per cent since June 2022, translating to a quarterly jump of Rs 2,000 in household expenses.
“At the peak of inflation in 2022, only 8 per cent of the households responded that they are comfortable with their then financial situation. As of Q1 ’24, this number has jumped to 16 per cent,” said the report, referring to the calendar year.
“However, in both the rounds there were 34 per cent of the households that were finding it difficult to manage their expenses. In other words, a third of India is still under severe financial stress.”
‘Bright star’
“A bright star in this year is the resurgence of the rural market. Rural’s growth started trailing urban’s growth since the last calendar quarter of 2022, and urban raced ahead while rural continued to limp its way for the most part of 2023,” said the report.
“Unfortunately, the urban market’s trajectory communicates stress. It did not see growth for three straight quarters, and is contending with a huge Q2 2023 base. Therefore, urban is likely to remain under stress, while rural may consolidate its position in Q2.”
Sales volumes in the rural market grew to 5.8 per cent in Q1 CY24 (first quarter of the calendar year), up from 4.8 per cent in Q4 CY23. Volume growth in the urban market fell to 4.7 per cent in Q1CY24 from 5.6 per cent in Q4CY23.
Some factors will continue to do well for rural markets. Government continuity is likely to translate into stability in the market and fewer changes to the interim Budget, which had a rural focus.
“We should also bear in mind that more states are heading for polls in the coming months, and the second half should only see a rise in populist measures for the rural market, which would definitely provide the needed stability to the rural market,” said the report.
It marked out events to be cautious about. “Central India received excess rainfall in the year. South India has received below-par rainfall till now. There are reports that rabi harvests are likely to be hit this year. The effects of this will be felt towards the second half more, but certain rural markets could turn on the caution switch already.”
The report expected rural markets to maintain better growth levels compared to urban for the rest of the year.
First Published: Jun 21 2024 | 1:24 PM IST
