Five Factors That Helped Rural India Continue Driving Indian Economy In September

The story of India’s rural areas driving the economy continued in September with a sharp rise in passenger vehicle sales adding to the already rising trend in tractor sales, digital money transactions, increased manufacturing activities and higher sowing of kharif crops.

India’s economy had received a setback after the onset of the coronavirus (COVID-19) pandemic, mainly in view of the lockdown announced by the Narendra Modi government during mid-March to May-end. Since then, rural India has led the economic recovery reporting good numbers on a number of crucial factors starting with tractor sales.

Tractor sales continue to rise

A positive rural demand continued to drive sales of tractors in September. Mahindra and Mahindra reported a 17 per cent increase in tractor purchases last month. The company sold 43,386 tractors compared to 37,011 during the same period a year ago.

Escorts, another major manufacturer, reported a nine per cent rise in tractor sales. The company said it sold 11,851 tractors against 10,855 in September last year.

One of the new entrants in the markets, Sonalika Tractors reported a 46 per cent jump in its sales. The Punjab-based firm sold 17,704 tractors compared with 10,571 in September 2019.

The strong tractor sales were supported by good sales of farm equipment too, reports said.

Passenger vehicle sales surge 37 per cent

The sales of passenger vehicles increased 35 per cent in September, bringing cheer to the automobile sector after nearly a year.

The rise in sales was led by market leader Suzuki which reported a 31 per cent rise in vehicle sales, recording sale of 1.47 lakh units. The highest rise in the percentage of sales was reported by the new kid on the bloc, Kia, owned by the Mahindras.

Kia reported a 76 per cent rise in its sales, while surprisingly Honda Motors registered a 36 per cent rise and Toyota sales were up 46 per cent.

Sales of two-wheelers, too, registered double-digit growth. India’s number one manufacturer Hero Motocorp sold 16.12 per cent more in September compared with September last year. It sold nearly seven lakh two-wheelers.

Honda Motors, the number two manufacturer, sold over five lakh vehicles to register almost a 10 per cent growth, while Bajaj Auto sold nearly 24 per cent vehicles more at 2.19 lakh units.

Reports said that despatch of vehicles by the manufacturers was up nearly 20 per cent ahead of the festival season. The automobiles industry expects sales to be strong during the current festival season.

One of the positive aspects of September vehicles’ sales is that urban areas too are showing signs of demand pick-up.

Digital payments zoom to record numbers

In September, digital transactions surged to a new record. The National Payments Corporation of India said 180 crore transactions took place last month with their value pegged at nearly Rs 3.30 lakh crore.

Compared with August, this is 10 per cent higher and authorities expect the transactions to top 200 crore soon.

Digital transactions, which were affected by the onset of COVID-19, have rebounded with vigour since June, hitting new highs every month since then.

Manufacturing activities at 8-year-high

The most cheerful news came from the manufacturing sector which has been badly hit by the coronavirus pandemic. The activities rose to an eight-year high in September.

The IHS Markit India Manufacturing Purchase Manager’s Index was up at 56.8 per cent last month against 52 in August. It is for the second consecutive month that the index saw a positive surge.

It is the highest since January 2012, which IHS Markit said, is the third quickest rise in its history. The survey is based on 50 indicators of economic expansion.

One of the reasons for the rebound in manufacturing is also the pent up demand that was built during the Covid-19 lockdown.

Good monsoon aids higher kharif sowing

The rise in rural economy has sown the seeds for further recovery as growers were encouraged by good returns from the rabi crop harvest in April.

Coupled with this, India had a good monsoon with nine per cent excess rainfall. This is for the second consecutive year that the country has had excess rainfall.

Farmers went in for early sowing and it reflected in the numbers. At one point of time, showing was nearly double the normal area.

In the final analysis, kharif sowing has been reported higher at 109.53 million hectares (mh) than the normal 107.07 mh.

Paddy sowing led the rise (40.1 mh versus normal 39.72 mh), though there has been a lower coverage of coarse cereals such as jowar and bajra. Pulses, oilseeds, cotton and sugarcane sowing is also higher than normal this year.

With the Modi government raising the minimum support price for key crops, farmers can hope to reap more benefits with their kharif harvest, which has begun in some parts of the country.

Probably, this will ensure that the gains to the economy till September will continue.