Kharif sowing gap narrows; UBS discounts sharp decline in rural demand

Jain said overall, the group expects rural demand to remain more resilient than in previous episodes of monsoon-related stress, even as growth moderates from current levels

Sowing of kharif crops nearly reached 2025 levels in the week ended August 7, as rainfall continued across parts of India, albeit with occasional breaks.

 

The performance of the monsoon over the next few weeks will be crucial in determining the kharif harvest and whether soil moisture remains adequate for the early sowing of rabi crops.

 

Meanwhile, Tanvee Gupta Jain, chief India economist at UBS Securities, said a sharp decline in rural demand in FY27 due to a below-par monsoon appeared unlikely, citing stronger household balance sheets after two consecutive good crop years in 2023 and 2024, continued government spending and welfare transfers, and supportive credit conditions.

 

In a note titled “Rural Demand at Crossroads”, Jain said these factors should cushion rural incomes and provide a buffer to consumption. UBS expects rural demand to remain more resilient than in previous episodes of monsoon-related stress, although growth could moderate from current levels.

 

Despite concerns over El Niño, improved farm cash flows (from the previous two good monsoon years), government welfare transfers, GST-related benefits and strong credit growth have likely boosted rural household purchasing power and supported consumption growth so far this fiscal, she said.