Domestic motorcycle sales have fallen by 8.2 per cent year-on-year in February, marking a fifth consecutive month of negative growth. This, taken with the 9.9 per cent annual decline in sales of tractors during April-January, is clear evidence of pressure on rural incomes from low crop realisations and production setbacks on account of poor monsoon rains. Almost 50 per cent of motorcycles in India are today sold in “rural” centres with populations below 10,000.
The last 10 years were good for Indian agriculture and rural incomes in general, which also explains why sales of motorcycles zoomed from 4.2 million to 10.5 million units between 2003-04 and 2013-14, while going up from a mere 1.9 lakh to over 6.3 lakh units for tractors during the same period. True, other factors — improved road connectivity to villages, growing rural consumer aspirations and farm labour shortages — also played a part. But the main driver, no doubt, has been higher rural incomes.
While a normal monsoon in 2015 could make this time’s output decline a one-time affair, the same cannot be said about crop realisations that have more to do with global prices. Since March 2014, the benchmark FAO food price index has dipped 16.1 per cent. The crash in global prices has hit Indian exports of farm commodities, from cotton, basmati rice, maize and sugar to guar gum and oil meals. Besides, it has practically ruled out increases in minimum support prices (MSPs) — unlike in the last decade when the government had to per force align these with rising global prices. Current signs point to an extended bear cycle in agri-commodities, which does not augur well for rural incomes. That, in turn, would not be good for makers of tractors, fertilisers, two-wheelers, consumer durables or FMCG products — which have all ridden piggyback on the rising rural purchasing power of the last decade.
The most easy and populist way to address the above problem is through hefty hikes in crop MSPs and MGNREGA spends — which, in fact, even sections within industry are advocating. But this is short-termism that is neither economically nor fiscally sustainable. A more sensible approach, instead, would aim at a diversification of the rural economy that reduces dependence on farming as the main provider of jobs and incomes. This should be accompanied by agriculture itself becoming an increasingly specialised affair, employing those in a position to invest in mechanisation and yield-enhancing technologies that help bring down production costs. It would pay to think and act for the long term rather than seeking quick fixes.