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BW Businessworld

Chew On This

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Is the India consumption story intact? In the recent past, one international agency after another put the country either on its watch list or downgraded it. Then, there have been many who have questioned whether India is truly shining. To gain an insight into whether the uncertainties faced by corporate India had taken their toll at the grassroots level, whether the much-touted governmental non-performance was for real, and if the India consumption story had truly halted midway, a team of analysts from IDFC Securities traversed 7,000 km across seven states gathering feedback.

Called ‘Tour de India', the team travelled through scores of places (see box) across the length and breadth of the country to uncover the real story.

Their observations suggest that all is well. The first thing the team discovered was that India's per capita income was actually 30 per cent higher than the government estimates of Rs 53,331 in most regions. Even roadside vendors had decent incomes. While a coconut seller in Mahabalipuram took home Rs 30,000 a month, a cucumber seller from Maharashtra admitted to making Rs 7,500 per month.

Restaurant owners did brisk business, too. A Chinese eatery in Mhow, or the Indore Special Mixture Wallah (snack retailer), both in Madhya Pradesh, did business worth Rs 10,000 per day, while a dhaba on the Nashik-Akola highway made Rs 16,000-18,000 per day.
 
The failure of the monsoon is no longer something that farmers lose sleep over. In the past few years, thanks to good monsoons and increasing yields, farm incomes have gone up.

In some areas such as Chhattisgarh, a farmer who held more than 100 acres of land claimed that he had not lost money even once in the past 20 years. "The on-ground feel is that even if the monsoon is off the mark by 10 percentage points, there are adequate water reserves to take recourse to. Also, given the financial upswing in rural India over the past few years, farmers are much better placed than ever before to manage the slump in rainfall," says Nikhil Vora, managing director, IDFC Securities. Even ITC e-Choupal outlets have been showing a healthy growth. One outlet on the Indore-Ahmedabad road near Dhar had a CAGR of 25 per cent.



Then, improvements in infrastructure over the past few years, such as the Golden Quadrilateral, have resulted in better realisations for the farmer who now spends less money on transporting his produce to the mandi (marketplace). Mobile phones have also ensured that farmers always sell at the mandi that offers the best price by taking the transport cost into account. Also, two of the biggest investments made by rural India have been in agricultural land and in gold — both are now trading at an all-time high.
 
That's not to say that there are no problems at all. Finding labour is becoming a huge problem across the country. Some complain that government schemes such as MGNREGA are reducing the motive of people to work. In one detergent manufacturing facility in Tamil Nadu, the IDFC team found that workers were demanding that their wages be raised from Rs 15,000 to Rs 25,000.

Sure, covering 7,000 km and assuming that this sample will hold true for a country which is over 3 million sq km in size is fraught with the risk of over-extrapolation, agree IDFC executives. But one year of a perceived slowdown resulting in a global rethink on India might also be stretching things a bit too far.

(This story was published in Businessworld Issue Dated 23-07-2012)