business-india-news

Rural spending to improve PFCE: Ind-Ra

New Delhi, Dec 3 : The low growth of private final consumption expenditure (PFCE) is emerging as a possibly well-entrenched trend in India, as was expected by India Ratings & Research (Ind-Ra) in its 2013 retail outlook report.


PFCE grew only 2.2% yoy for the quarter ended September 2013 (2QFY14). As such, a 4.6% yoy jump in the agricultural component of GDP for 2QFY14 from 1.7% yoy in 2QFY13 would possibly have translated into a larger improvement in PFCE. However, the possible reason of this drag is the slowdown in urban spending.

While Ind-Ra expects rural spending to improve PFCE, a possible further slowdown in urban consumption may potentially limit the PFCE growth rate.

The Consumer Confidence Survey (14th round) conducted by the Reserve Bank of India in September 2013 in six metropolitan cities across India suggests that the consumer confidence of urban consumers is deteriorating. In the past, the survey has been, to an extent, indicative of future private consumption.

India's possible moderation in urban spending may be attributed to the weak corporate performance translating into moderate nominal wage growth which often does not beat consumer price inflation.

The estimated negative real wage growth affects the discretionary purchasing power of urban consumers.

The moderation in urban spending may be reflected in the performance of predominantly urban consumption dependent sectors such as quick service restaurants (QSR) and retail. Passenger vehicle (PV) sales also have substantial dependence on urban spending.

QSR: Muted demand for this sector may be reflected in lower or negative comparable same stores sales in 2QFY14. Also, EBITDA margins have been impacted due to the inability of the companies to pass on increases in raw material prices to customers due to weak demand and intensifying competition.

Retail: Median margins for the sector, thus far in FY14, have been marginally better than the corresponding quarters in FY13. Ind-Ra believes this may be attributable to the improved operational efficiency of major players in the sector.

However, given the drag in urban spending, doubt remains over whether the double-digit revenue growth may be maintained at the current levels of EBITDA margin.

Auto: The weakening discretionary purchase power of urban consumers would continue to weigh down PV volumes.

Any meaningful support to PV volumes may come from increased rural spending post a successful harvest season.

--IBNS (Posted on 03-12-2013)

business-india-news headlines

DLF leases 3 million sq ft office space in 2013-14

Cairn India posts 18 percent rise in Q4 profit

Paris Motor Show woes Indian visitors

Toonz forays into artificial intelligence toys, films

Sensex, Nifty at new highs; capital goods sector gains

Sensex hits record high for third straight day

Reebok India launches 'live with fire' campaign

KBC winner Sunmeet Kaur to launch boutique in the capital

'Goa sells maximum beer in India'

RIL raises $550 mn from Japanese banks

OPEC daily basket price closes lower

Rupee slips below 61 against the dollar

Quick Links: Goa | Munnar | Pondicherry | Free Yearly Horoscope '2014

Comments

Your e-mail:


Your Full Name:


Type verification image:
verification image, type it in the box

Message:

Back to Top