A rural-urban conundrum

by Mahesh Vyas

Rural India was in the limelight in the week ended December 24. First, rural Gujarat delivered a shock to the BJP by voting largely against the party and reposing faith in an energised Congress. There was a clear divide between urban and rural voters. While the former voted mostly for the BJP, the latter rooted for the Congress. Reportedly, it got 85 per cent of the urban assembly seats and only 37 per cent of the rural seats.

The jolt from the way the campaign unfolded and the final result was big enough to make BJP look less invincible and surprisingly vulnerable in the coming state elections of 2018. Like in Gujarat, the BJP has to protect its turf in Rajasthan and Madhya Pradesh. Given the recent stress in the hinterlands, it faces a rural challenge in Madhya Pradesh.

The Gujarat election results almost immediately led analysts to believe that the next Union Budget would provide copious sops to the farm sector or rural India in general. Most expected the government to raise minimum support prices and allocate more resources towards rural India. Apparently taking a cue, several industry leaders have started talking of great expectations from rural India in 2018.

The government has obliged already by raising import tariffs. On December 22, the Central Government imposed a 30 per cent duty on import of gram (chana) and red lentil (masoor). Hitherto, both these pulses could be imported freely. According to media reports, the government is also considering increasing import duty on wheat from its current level of 20 per cent. Madhya Pradesh and Rajasthan account for 47 per cent of masoor production and 30 per cent of wheat production in India. The two states along with Karnataka account for 65 per cent of gram production.

During the last week, Karnataka government announced a minimum support price of Rs.6,000 per quintal for tur daal against a market price of Rs.3,500-4,500 per quintal. It also announced a minimum support price for ragi of Rs.2,300 per quintal against the market price of Rs.1,600 per quintal.

Earlier, on November 18, the Centre had raised import duty on crude palm oil from 15 per cent to 30 per cent. It had also raised the import duty on refined palm oil from 25 to 40 per cent. The import tax on crude soya oil was increased to 30 per cent from 17.5 per cent, while on refined soya oil it was raised to 35 per cent from 20 per cent. Madhya Pradesh is the largest soyabean producer in the country.

Political jockeying by activists and government interventions have once again raised the spirits of rural India. Rural household consumer sentiments shot up by 4.6 per cent during the last week. This is in sharp contrast to the 5.7 per cent fall in consumer sentiments of the urban households.

The proportion of rural households that said that their current economic conditions were better than they were a year ago shot up to 31 per cent. This is way above the two-year average of 24 per cent who said that their financial condition at a point in time is better than it was a year ago. On the other hand, the proportion of households that said that their economic conditions were worse off than a year ago was 14.9 per cent which is similar to the average of the last two years. Thus, the proportion of households that were ambivalent has reduced.

In urban areas also, there is a movement away from the ambivalent group. But here, the movement is in the opposite direction towards a feeling of a fall in financial well-being. The proportion of urban households that said that their economic conditions were worse than they were a year ago was 15.2 per cent, which is higher than the average of 11.6 per cent. Such a feeling though is not new to the urban areas. It has been around for several weeks.

As governments try to woo the rural areas because of the overt angst in these areas, it would be good for them to not ignore the urban regions where a silent discontent could upset political charts equally.

Political pressures build up when economic growth slows and job-creation is slower than is necessary to feed the aspirations of a young India. These pressures could spur short-term fixes. But we know that active cherry-picking of pressure groups to bestow favour will only make matters worse in the medium term. An acceleration of growth through enhanced job-creating investments is the only sustainable way out for all political parties and, for the country.

First Published in Business Standard Link

Unemployment Rate
Per cent
5.5 +0.0
Consumer Sentiments Index
Base September-December 2015
95.6 +0.2
Consumer Expectations Index
Base September-December 2015
96.0 +0.3
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 3.42 2.27
Completed projects 1.25 1.16 1.43 0.82
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: 20 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 10.1 20.1
 Expenses 9.0 13.0 16.8 22.5
 Net profit -18.0 -14.3 -82.0 11.0
 PAT margin (%) 5.5 4.8 1.2 15.0
 Count of Cos. 4,502 4,493 4,286 96
Non-financial Companies
 Income 8.2 13.3 11.5 19.7
 Expenses 8.1 12.3 12.4 23.2
 Net profit -6.1 13.2 -2.6 6.6
 PAT margin (%) 6.2 6.4 6.5 14.9
 Net fixed assets 9.2 11.9
 Current assets 2.9 8.0
 Current liabilities 11.0 10.3
 Borrowings 3.4 1.8
 Reserves & surplus 7.9 7.8
 Count of Cos. 3,460 3,464 3,318 70
Numbers are net of P&E
Updated on: 20 Jul 2018 12:21PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.6 1.8 5.9 11.6
 Expenses 5.7 1.9 5.9 16.1
 Net profit 0.1 -9.7 25.3 -43.1
 PAT margin (%) 3.0 2.8 3.4 4.3
 Assets 9.5 10.2 7.4 14.3
 Net worth 8.5 11.3 7.6 13.7
 RONW (%) 5.8 4.9 5.8 5.3
 Count of Cos. 26,129 24,412 21,971 368
Non-financial Companies
 Income 4.9 1.0 5.7 9.9
 Expenses 5.0 0.3 6.1 9.2
 Net profit -8.6 19.9 20.2 8.9
 PAT margin (%) 2.0 2.4 3.0 12.1
 Net fixed assets 13.3 17.8 6.6 55.5
 Net worth 7.0 12.1 6.5 10.3
 RONW (%) 4.6 5.1 5.9 15.0
 Debt / Equity (times) 1.1 1.1 1.0 0.3
 Interest cover (times) 1.9 1.9 2.1 8.8
 Net working capital cycle (days) 66 65 62 7
 Count of Cos. 21,306 20,431 18,292 255
Numbers are net of P&E
Updated on: 20 Jul 2018 4:05PM