Muted monsoons, FMCG sales in rural areas and Bitcoin is back in business

A round-up of key business events in the country such as the impact of muted monsoons, the significance of EV sales crossing the 1 million mark and strong investments in real estate

Business news, Poor monsoon, Skymet prediction
With the farm sector employing half of the country's workforce, a poor monsoon will have an overall impact on the economy when India is due to hold the 2024 Lok Sabha elections next year.

The Federal brings you the key economic and business events on Tuesday (April 11).

Weather forecaster Skymet says the monsoon will be muted this year

Skymet, India’s leading weather forecasting and agriculture risk solution company, expects the upcoming monsoon to be ‘below normal’ to 94 per cent, for the four months from June to September. Releasing its monsoon forecast for 2023, it retained its January 2023 assessment which said that the rainfall would be sub-par.

Skymet expects northern and central parts of the country to be at risk of a rain deficit. Gujarat, Madhya Pradesh and Maharashtra will witness inadequate rains during the core monsoon months of July and August. Punjab, Haryana, Rajasthan and Uttar Pradesh, the agri bowl of North India, are likely to observe less than normal rains during the 2nd half of the season.

What it implies: Approximately 600 million people depend directly on the monsoon. Rain still nourishes two-thirds of Indian agriculture rather than irrigation, indicating that India’s yield relies on it. Over 70 per cent of the country receives rainfall between June and September, and any poor monsoon can seriously harm the farm industry, which amounts to 20 per cent of the country’s GDP

This may significantly impact inflation because food price inflation accounts for 40 per cent of the consumer price index. It may also reduce the production of rice, sugar, cereals, legumes, and other commodities. With the farm sector employing half of the country’s workforce, a poor monsoon will have an overall impact on the economy when India is due to hold the 2024 Lok Sabha elections next year.

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FMCG sales in rural India exceed that of urban areas

Recent media reports indicate that rural FMCG sales grew nearly 17 per cent in January-March in 2023, while sales in urban areas increased by just 7.9 per cent during the same period.

What it implies: Several FMCG companies have been expanding their reach among rural areas, which accounts for 39 per cent of sales. It shows that there is more room for growth in this area. Given that growth in rural markets is expected to outpace urban markets for the foreseeable future, rural and semi-urban India will be more resilient over time.

Rural markets’ pre-Covid growth was stagnant as consumers’ propensity to spend more money was impacted by bad monsoons and lower salaries—the change in consumption could result from reverse migration and government spending on essential programmes like MGNREGA. However, poor monsoon could impact rural consumption to a large extent; hence, to sustain the same growth, FMCG companies might have to promote value packs because future income development in these sectors could be complex.

EV sales cross the 1 million mark in 2022-23

The sale of electric vehicles, especially electric scooters, grew over 150 per cent to 1.15 million units compared with 1.09 million units the previous year.

What it implies: The high sales were mainly because of the ₹10,000 crore FAME 2 (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) scheme, which incentivises electric vehicle manufacturers and, at the same time, has been able to reduce EV prices by around 35 per cent.

However, post-festive season, the sales have dropped after the Centre withheld over ₹1,200 crore subsidy to the EV makers on allegations of violating local sourcing norms to claim subsidies. Hence, this incentive may be withdrawn.

The Society of Manufacturers of Electric Vehicles (SMEV) has pointed out that 16 companies representing more than 95 per cent of the industry want quicker resolution of FAME 2, which will help them tie up their business plans for the next fiscal. In addition, it has sought relaxation in PMP (Phased Manufacturing Program), which focuses on local sourcing of components.

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Bitcoin crosses $30,000 for the first time since June 2022

A Bloomberg report has said Bitcoin has climbed over $30,000 for the first time since June 2022, rallying over 80 per cent since the beginning of the year.

What it implies: Bitcoin may be back in business even though its value was still down 50 per cent from its all-time in November 2021. However, the cloud over it being an alternative to paper currency persists.

One of the reasons for Bitcoin faring better comes from the failure of three US banks, which reignited the idea among cryptocurrency proponents that it presents a more enticing alternative to conventional finance. However, it remains to be seen whether the rally will sustain for a more extended period.

Meanwhile, there have yet to be any updates from the Reserve Bank of India when India’s version of digital currency is expected to rival Bitcoin, Ethereum and others. India’s finance minister Nirmala Sitharaman had, while presenting the Union Budget during the previous, said the country would soon have its digital currency.

Institutional investments in real estate remained strong during Q1 2023 at $1.7 billion

According to real estate multinational Colliers International, the office sector continued to drive the investment inflows accounting for 55 per cent of the total inflows during the quarter, followed by the residential sector at 22 per cent share. Investment inflows in the office sector rose by 41 per cent YoY at $0.9 billion, led by select large deals.

Owing to the strong growth prospects in the office sector, key institutional investors (mutual funds, hedge funds) are entering into strategic partnerships to strengthen their presence and expand their office portfolio in India. As a result, investments from domestic investors rose 4X YoY during the quarter. Despite higher lending rates, domestic investors remained committed towards residential assets during the quarter.

On the other hand, global investors remained inclined towards office and industrial assets and dominated the total investment inflows at 76 per cent. The larger markets, such as Delhi-NCR and Bengaluru, attracted 1/3rd of the total investments during the quarter, led by increased activity in these markets.

However, most inflows (63 per cent) were through multi-city deals. Global institutional investors’ appetite for office assets remains strong owing to India’s growing talent pool, digitisation, enhanced transparency in deal structures and stable returns. Foreign investments accounted for about 93 per cent of the total investments in office assets during Q1 2023.

Business book launch: ‘The book ‘Lala Shri Ram: The man who saw tomorrow’ has been authored by Sonu Bhasin, a Tata Administrative Service Officer, who was earlier director at ING Barings Private Banking, president at Axis Bank, group president at Yes Bank, and COO at Tata Capital Limited. The book chronicles the life and times of Lala Shri Ram, synonymous with DCM, who overcame initial business failure and fragile health to build a solid business empire, rated among the top five in the 1960s.The Federal brings you the key economic and business events on Tuesday (April 11).