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Indian companies are betting on small towns and villages to sustain growth at a time the third-largest Asian economy is bracing for pain from US’s punishing 50 per cent tariffs.
Businesses from biscuits makers to building materials suppliers underscored the buoyant rural demand in investor calls for their June quarter earnings, adding that low inflation and the prospect of a good harvest will ensure the 900 million Indians living outside cities keep spending.
Consumption growth in India’s countryside has outpaced that in urban markets for six straight quarters, according to data analytics firm NielsenIQ.
Demand in rural India, dominated by its agrarian economy, is a bit more insulated from the impact of the exorbitant US tariffs, making it an important focus area to get growth from, Sudhanshu Vats, joint managing director at adhesives and paint maker Pidilite Industries Ltd told sources.
India’s gross domestic production in the three months through June expanded at the fastest pace in more than a year. Private consumption grew 7 per cent on the back of strong rural demand and improvement in agriculture wages.
Meanwhile, real rural wages rose at the fastest pace in more than seven years, according to data from Citigroup Inc. The gap between rural and urban monthly per-capita consumption has also narrowed significantly, official figures showed.
Pidilite is adding distributors and setting up branded stores in smaller towns, with population of less than 12,000, as well as expanding waterproofing centers and mobile customer support vans, to drive growth.
Consumption accounts for more than half of the GDP in the world’s most populous nation, and mass spending in its hinterland is fast catching up with that in cities.
Last month, Prime Minister Narendra Modi announced tax cuts that aim to shield the economy from the negative impact of US tariffs.
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