Rural spending to be less vulnerable to poor monsoon: Ind-Ra

Impact of a deficient monsoon on rural spending will be "less severe" than what it used to be a decade ago as rural landscape of the country has changed a lot, rating agency Ind-Ra said today.
A reduction in rural spending nevertheless due to a bad monsoon will be more of a psychological outcome rather than a sudden fall in affordability, it added.
The Met Department has projected deficient rains this year.
"Rural economy is now benefitting more from industrial expansion than urban economy. All this implies rural income now is far less vulnerable to monsoon than it was few decades ago," India Ratings and Research (Ind-Ra) said in a statement.

Stating that more than two-thirds of rural income now originates from non-agricultural activities, the rating agency said higher growth of the industrial and services sector in rural areas over the years has increased the share of non-agriculture activities in rural income.
Due to space constraints, new industrial establishments are increasingly coming up in rural areas, leading to net value added per factory in rural areas being consistently higher than in urban areas since the beginning of the new millennium, it said.

While rural monthly per capita expenditure is still lower than urban monthly per capita expenditure, the composition of goods and services consumed by rural India is increasingly urbanising and rural spending on discretionary goods and services is growing rapidly, it said.

"Ind-Ra expects this trend to only accelerate over the coming years with the physical and digital connectivity of rural area improving with each passing year," it added.
The agency also believes that rural consumption will witness a much faster urbanisation as compared to the past if Jan Dhan Yojana, Aadhaar and Mobile Number Portability become a reality and seamlessly allow the government to offer subsidies as monthly transfers.
Observing that fall in rural spending due to bad monsoon would be more of a psychological outcome, Ind-Ra said that companies having rural exposure could overcome this by innovating and shifting their goods/services to lower price points to offset the psychological barrier of perceived lower affordability.