Farmers' optimism pushing up consumer sentiments

by Mahesh Vyas

The consumer sentiments index has risen sharply during November. It is likely that the index would end up being about 6 per cent higher than its level in October. This would be a substantial jump during a month because ever since the index was launched in January 2016, it increased by more than 3 per cent during a month only once. The average monthly increase in the index has been negative. The mean monthly change in the index has been -0.32 per cent and the median, -0.53 per cent. The increase in the consumer sentiments index during November is therefore extraordinary.

It is also a very strong correction to the sustained weak performance of the index in the past six consecutive months. Between May and October 2017, the index has either stagnated or declined during a month.

The consumer sentiments index for the week ended November 26 was 6.4 per cent higher than it was four weeks ago in the week ended October 29.

Something has changed substantially in consumer sentiments during November 2017.

Both the constituent indices - current economic conditions and consumer expectations have risen smartly during November.

An explanation of this impressive increase in consumer sentiments is in the rural-urban break-up of the index. Rural India has seen a sharp increase in consumer sentiments recently.

Consumer sentiments had seen a recent low in the week ended October 22. The urban index was at its all-time low and the rural index was also close to its all-time low. Since then, both indices have recovered. The urban index recovered by nearly 4 per cent and the rural index recovered by a whopping 11 per cent.

What could have caused this sudden increase in rural consumer sentiments? The farming community has not done too well this year and it is unlikely that they would do well in the coming season either. This is borne by the fact that during kharif 2017, foodgrain output was down by 0.3 per cent and major oilseeds production was down by 11.5 per cent. Further, the first four weeks of rabi sowings ended November 24, 2017 shows a 1.5 per cent fall.

Agricultural output had seen a good growth in 2016-17. Foodgrain production had grown by nearly 10 per cent while major oilseeds production had grown by nearly 27 per cent. Although part of this output was reportedly destroyed by deliberate action and the gains were partly offset by a crash in prices of select commodities following demonetisation, it was still a significant positive growth after two years of decline.

In comparison, 2017-18 does not look like a good year for farmers.

And neither have the terms of trade tilted significantly in favour of rural India. The CPI grew 2.76 per cent for urban India and 2.71 per cent for rural India.

So, what are the rural folks rejoicing? My guess is it is hopes on their collective action to politically assert their demands of entitlement.

According to media reports more than sixty thousand farmers from 184 organisations from 25 states gathered in Delhi under the banner of All India Kisan Sangharsh Coordination Committee on November 20 and 21. They demanded nation-wide waiver of loans and an assurance of fair prices for their produce.

The farmers look forward to two bills to the effect to be tabled in the Lok Sabha during its winter session. Farmer organisations are also planning more demonstrations - a campaign was set to begin on November 26 from Bardoli in the election-bound state of Gujarat.

Farmer protests have now become a regular feature across the country. In October this year, sugarcane farmers in Maharashtra protested for fair and remunerative price and farmers in Uttar Pradesh burnt their crops outside the Uttar Pradesh assembly in protest against the "paltry" Rs.10 hike in sugarcane prices.

We don’t hear much of industrial labour unrest nowadays. A few that are reported are also reported to be dealt with firmly - like in Gurgaon’s automobile belt. But, farmer protests and caste protests have been seeing traction. Both seek entitlements such as reserved jobs or assured profits or free money (that’s what a loan waiver is) from the political system.

It seems that many of these do succeed. Many states did waive farmer loans and also assured better prices for farm produce. Perhaps, farmers have understood that collective political pressure does yield results. This explains the rise in their sentiments. As thousands of farmers assembled in Delhi for protests, their families back home raised their expectations and also believed that their protests would improve their lot substantially.

First Published in Business Standard Link

Unemployment Rate
Per cent
5.4 -0.0
Consumer Sentiments Index
Base September-December 2015
95.6 0.0
Consumer Expectations Index
Base September-December 2015
96.0 0.0
Current Economic Conditions Index
Base September-December 2015
95.0 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Sep 17 Dec 17 Mar 18 Jun 18
New projects 1.25 1.49 3.60 2.27
Completed projects 1.25 1.15 1.42 0.86
Stalled projects 0.69 0.88 3.41 0.30
Revived projects 0.34 0.22 0.26 0.22
Implementation stalled projects 0.78 0.71 1.92 0.03
Updated on: 16 Jul 2018 12:20PM
Quarterly Financials of Listed Companies
(% change) Sep 17 Dec 17 Mar 18 Jun 18
All listed Companies
 Income 7.9 12.0 10.4 18.1
 Expenses 9.0 13.0 17.1 21.2
 Net profit -18.0 -14.3 -80.7 7.3
 PAT margin (%) 5.5 4.8 1.2 19.3
 Count of Cos. 4,501 4,491 4,280 25
Non-financial Companies
 Income 8.2 13.3 11.9 18.2
 Expenses 8.1 12.3 12.8 22.2
 Net profit -6.0 13.2 -1.6 5.7
 PAT margin (%) 6.2 6.4 6.6 20.1
 Net fixed assets 9.2 11.9
 Current assets 2.9 8.2
 Current liabilities 11.0 10.6
 Borrowings 3.4 1.6
 Reserves & surplus 7.9 8.0
 Count of Cos. 3,466 3,469 3,317 19
Numbers are net of P&E
Updated on: 16 Jul 2018 12:20PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.6 1.8 5.8 12.3
 Expenses 5.7 1.9 5.8 17.9
 Net profit 0.1 -9.3 26.2 -51.0
 PAT margin (%) 3.0 2.8 3.5 3.6
 Assets 9.5 10.2 7.3 14.1
 Net worth 8.5 11.3 7.0 11.0
 RONW (%) 5.8 4.9 5.9 4.8
 Count of Cos. 26,056 24,316 21,815 218
Non-financial Companies
 Income 4.8 1.0 5.7 9.8
 Expenses 5.0 0.3 5.9 9.3
 Net profit -8.5 20.4 21.4 11.9
 PAT margin (%) 2.0 2.5 3.0 13.4
 Net fixed assets 13.3 17.4 6.5 21.2
 Net worth 7.0 12.0 5.7 5.3
 RONW (%) 4.6 5.2 6.1 17.7
 Debt / Equity (times) 1.1 1.1 1.0 0.2
 Interest cover (times) 1.9 1.9 2.1 16.0
 Net working capital cycle (days) 66 65 62 -12
 Count of Cos. 21,269 20,387 18,246 150
Numbers are net of P&E
Updated on: 04 Jul 2018 4:50PM