Mumbai: Private consumption is expected to rise 90 basis points to 8.3 per cent this fiscal compared with 7.4 per cent in fiscal 2016 due to a good monsoon that sparked off growth in agriculture and rural India.
Crisil’s chief economist Dharmakirti Josh said: “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 per cent this fiscal compared with 7.4 per cent in fiscal 2016.”
After two years of drought, the monsoon this year saw equal distribution with only a third of the districts seeing deficiency compared with almost half in fiscal 2015 and 46 per cent in 2014.
Importantly, most of the deficient districts are either well-irrigated or not important agriculturally, said Crisil. Area coverage under kharif crops has risen to 1,060 lakh hectares compared with 1,052 lakh hectares last year.
As a result, Crisil expects nominal agricultural GDP to rise by Rs 1,49,000 crore this fiscal, compared with Rs 97,800 crore in fiscal 2016. This is despite a spike in farm output putting downward pressure on prices and farm incomes.
Also, the rural markets, which account for 54 per cent of private consumption, are already seeing some green shoots. Crisil expects real GDP to grow 7.9 per cent this fiscal and agriculture GDP at an above-trend 4 per cent, while CPI inflation would remain contained at 5 per cent (10 bp up year-on-year).
The road ahead, looks good says Crisil as with the advent of monsoon and ample rainfall, the reservoir storage situation has improved this season.
“Data till September 22 indicates reservoir storage was 17 per cent higher on-year. This should support agricultural production this season and the next,” says Crisil.
