India Inc worried dry spell could translate into less earning

Though the share of agriculture in the country’s GDP is 25 per cent, the respectable GDP growth of 5.4 per cent in the last financial year was stimulated by a healthy 7.6 per cent growth in agriculture. A delayed monsoon will hurt crops, rural income and consumer spending later this fiscal’, says Chenoy.

According to Ficci, ‘delayed monsoon and crop failure will surely have a negative impact on the disposable income but the extent will depend on the amount of affected crops.’

The National Council of Applied Economic Research adds that ‘the effect of a delayed monsoon will be strongly felt by corporates in the October-December quarter.’

In a latest debt market update ICICI Securities has said that ‘poor rainfall till middle of this month is likely to hinder the demand for industrial products, thereby affecting economic recovery’. Says the spokesperson of leading home appliance manufacturer Samsung ‘though it is slightly premature, crop failure in North India will have an adverse impact on the peak buying season of festivals and marriage between October to December.’ The same can be said for wide section of the market including jewellery, consumer durables, accessories and clothing because of festival and marriage season.

Though a large section of the industry feels that situation is not too bad at this moment, the coming months may be very depressing in terms of products offtake. For LG Electronics ‘its too early but the fear is already there’.

Two-wheeler manufacturers like Hero Honda and Bajaj Auto are heavily dependent on rural markets. FMCG majors HLL gets 50 per cent of its soaps and detergent turnover from rural areas. White goods major Philips too gets half of its revenue from non-urban areas. Any adverse impact will hurt the corporate sector.

A Maruti official said that ‘the car industry is already in difficult situation. Any external impact of this kind is not welcome’. Home appliance makers like Usha Lexus and Bajaj Electricals are also jittery about market response in the coming months. Tractor industry which is already growing negatively for the past two years, is expecting another 10 per cent fall this year.

The number one tractor player Mahindra & Mahindra said in a statement ‘the uncertainty in respect of monsoon in different parts of the country may dampen the demand and influence its performance’. Tractor major Punjab Tractors too is expected to post lower sales this fiscal. ‘Though tractor is mainly bought by farmers who have irrigation system in place, the overall sentiment will be down’, said A. M. Sawhney, Senior vice-president (marketing) of PTL.