India's private consumption is likely to grow 8.3% in FY17: Crisil
Private consumption in India is projected to be above 8% in the current fiscal following the well-distributed rainfall and increase in rural incomes, said a latest report.
Crisil in its recent report has said that the distribution of monsoon this season has been the best in the last three years, with only a third of the districts seeing deficiency compared with almost half in fiscal 2015 and 46% in 2014.
“So this time around, India’s consumption story will have two legs instead of just the urban engine on which it has duked out the past two years. We see private consumption rising 90 basis points to 8.3% this fiscal compared with 7.4% in fiscal 2016," Crisil chief economist Dharmakirti Joshi said in press release on Saturday.
The consumption of consumer durables, fast moving consumer goods (FMCGs) and tractor sales has witnessed good growth from the rural markets, which accounts for 54% of private consumption in India.
The analytical firm expects the favourable monsoon to revive rural incomes and further push up demand for the private consumption.
Higher government expenditure on agriculture and rural development in the first quarter (Q1) will provide further support to incomes and demand in rural areas, it said.
As far as urban consumption is concerned, Crisil said the consumption from urban areas will remain healthy and will benefit further from lower inflation, spillovers from robust agriculture activity in manufacturing and services, increase in transmission of past interest rate cuts and the government's introduction of 7th Pay Commission and One Rank One Pension (OROP) payouts.
On the country's economic growth, it has projected the economy to grow above 7% in the current fiscal due to revival of private consumption from rural areas.
"We expect GDP to grow at 7.9% in FY17, and agriculture at 4%. As rural private consumption revives, it will spur a rise in capacity utilisation and kickstart the investment cycle by the end of this fiscal," Crisil said in a note.
The analytical firm has estimated the nominal agricultural GDP to rise by Rs 1,49,000 crore in FY17 as compared to Rs 97,800 crore in FY16 on the back of good monsoon this year.
On the inflation front, it expects ample kharif production to boost supply and bring down food inflation, especially for pulses where inflation has remained in double digits for 14 months on the trot now.
Moreover, the analytical firm expects the good monsoon to ease domestic prices of other food categories such as vegetables (15% weight in CPI food inflation), cereals, fruits, among others, which will offset the pressure from higher global prices.
Going forward, it has estimated the country's consumer price index-based (CPI) inflation to average 5% in current fiscal.