Virus-ravaged India bets on farmers to rescue economy

Bloomberg

India’s economy left cratered by the pandemic is drawing energy from one of its invisible and often-neglected engines: farmers.
Business leaders, policy makers and politicians alike are pinning hopes on the rural sector as bountiful rains have set the stage for another year of record crops. Higher disposable incomes with farmers are expected to boost demand from automobile to cement to gold jewellery.
That contrasts with the urban areas, where companies are still struggling to boost their sales following the pandemic that has hit business activities, hurt demand and caused labour shortage. The adverse impact of the world’s strictest lockdown in March continues to haunt, but the hinterland is holding out hope.
Maruti Suzuki India Ltd and the local unit of South Korea’s Hyundai Motor Co, the two main players in India’s car market, said October sales were the best-ever for any month. Hero MotoCorp Ltd, the world’s largest maker of motorcycles and scooters, as well as smaller rival Bajaj Auto Ltd, reported record sales, as rural markets provided a cushion against a downturn in cities.
“We have seen a stronger demand from rural areas across categories for our products as compared to last year,” Srinivasu Allaphan, director of sales and marketing at JK Tyre & Industries Ltd said in an email
response.
“We expect it to sustain for the next three quarters. Higher sales in rural markets will compensate for the losses in urban and semi-urban towns.”
Rural incomes have stayed strong as production of monsoon-sown food grains is estimated to hit record 144.5 million tons. The government’s move to raise support prices for some crops and boost spending on rural employment programs have also supported incomes of farmers and labourers.
“Despite Covid-19 and the related lockdown, the agricultural activities across the country have almost remained unaffected. This has raised the
hope that rural demand could drive the economic recovery,” according to India Ratings and Research Ltd, a unit of Fitch Ratings Ltd.
Some companies reported strong demand for their products and services, such as automobile, cement, steel, tires and jewelry, in rural areas.
Hindustan Unilever Ltd, Asia’s biggest maker of personal care products by market value, said its sales jumped the most since 2011. “We are seeing rural markets as well as smaller towns perform relatively better,” Sanjiv Mehta, chairman and managing director of the company, which sells its products through 8 million outlets in the nation, said on a conference call.
Tractors, passenger cars and light commercial vehicles are seeing a healthy demand as rural buying continues to be strong, according to Mahindra & Mahindra Financial Services. Farm equipment makers echoed the sentiment. “We continue to witness unprecedented retail demand,” said Hemant Sikka, president at Mahindra & Mahindra.
Demand for everything from tractors to jewellery notwithstanding, rural India alone may not be able to underpin a recovery in the economy that’s headed for its worst annual contraction on record, according to top officials and analysts.