India household consumption set to pick up in 2-3 quarters: Report
Softened inflation, which boosts purchasing power, improving crop outlook on good monsoons and a USD 20 billion social welfare spends on women are set to strengthen rural consumption, UBS Securities said in a report.
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Urban consumption will "stabilise" on aspects like RBI's rate cuts, USD 10 billion of policy stimulus through personal income tax changes and improved availability of credit, it said.
"Even as rural activity is gaining traction, we believe it is still too early to expect a broad-based recovery in household consumption, as rural consumption accounts for less than half a percentage share of the total," its chief India economist Tanvee Gupta Jain said.
"In our base case, we expect overall household consumption to start picking up over the next 2-3 quarters as rural consumption strengthens," she said.
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There is a "divide" within rural consumption wherein the demand for mass-market products is muted while premium categories continue to grow, the report said.
Real rural wage growth adjusted for food inflation rose to a six-year high of 4.5 per cent while agricultural terms of trade "worsened" on lower food prices in the June quarter, the report said.
Rural
consumer sentiment
was up, two-wheeler and tractor sales were up 9 per cent and 35 per cent on-quarter, respectively, and rural fast-moving consumer goods sales were also robust, the report said.
On the urban consumption front, the report said demand indicators, including passenger car sales and production of durable goods, fell sequentially in the June quarter, even as urban consumer sentiment remained stable.
The USD 55 billion payout to government employees from 2026, as the eighth pay commission recommendations get implemented, will help the urban demand, it said.
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