Indian Rural FMCG Market
The size of the rural FMCG market in India stood at $23.6B in FY 2018. This sector has delivered meaningful growth and contributed to more than 45% of the country’s FMCG market in recent years. Growth is majorly driven by the rising non-food expenses, backed by increasing income levels.
Market Size of Rural FMCG (in billion U.S. dollars)

Rural India Picking Up the Momentum

High-Frequency Data Indicates Faster Recovery
In June, tractor sales growth regained its lost ground and advanced 12% y/y, after witnessing a contraction of 80% in April. Domestic tractor sales by Mahindra & Mahindra (M&M) and Escorts were up 12% and 23%, respectively, in June. Further, the production of fertilizers has witnessed an attractive 7.5% growth in May, though the eight core sectors declined an overall 23.4% during the same period. As per government data, point of sale (POS) of fertilizers for farmers in April–June 2020 stood at 11.1 MMT, which is 82.81% higher than 61.05 MMT during April–June 2019

Indicators Pointing Toward Better Demand in Rural Areas

Positive Sentiment in the Agriculture Sector to Act as the Tailwind for Rural FMCG Space
The agriculture sector looks encouraging, driven by the better-than-expected output of Kharif crops and a favorable monsoon this year. The sowing of Kharif climbed 88% for the week ending July 3. Earlier, the record sowing of 104% had taken place for the week ending June 26. The boost in the sowing of crops was majorly driven by excessive rainfall in June. As of July 3, sowing of water-intensive crops such as soybean and cotton has witnessed significant growth of 398% and 100% as compared with de-growth of 66% and 16% for the same week a year ago. Further, the demand is expected to recover in the near-term on the opening of mandis and aggressive procurement of crops by the government.

Encouragement of Rural Employment to Boost Spending
The government released Rs 430B by the first week of July under MNREGA, out of an incremental allocation of Rs 1T for FY21. As per the data released by CMIE, the MNREGA scheme has provided employment to 43.7M households in June. Further, employment in farming has advanced 17% y/y to Rs 130M in June. This should trigger positive rural sentiment and calibrate rural consumption. Further, rural employment has received a positive trigger due to the reverse migration of labor to villages in the light of the COVID-19 outbreak.

Contribution of Rural to domestic revenue


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