Rural India consumption growth outpaces urban areas: CRISIL

Given the large size of India’s rural population, the value of goods and services consumed has always been greater in rural India, but urban India had narrowed the differential during most of the last decade by growing at a faster pace

For the first time since economic reforms began two decades ago, consumption in rural India is growing faster than in cities fuelled by rise in household incomes due to more non-farm job opportunities, says a study conducted by CRISIL.


Between 2009-10 and 2011-12, additional spending by rural India was Rs3.75 lakh crore, significantly higher than Rs2.9 lakh crore by urbanites, according to the study by ratings agency CRISIL.

"Underpinning this growth in rural consumption is a strong increase in rural incomes due to rising non-farm employment opportunities and the government's rural focus through employment generation schemes," says Roopa Kudva, managing director and CEO, CRISIL.

For sustaining the rural boom, it is critical to substitute short-term income boosters such as government sponsored employment guarantee schemes with durable job opportunities in rural areas, the study noted.


National Sample Survey Organisation (NSSO) data shows that from 2004-05 to 2009-10 rural construction jobs rose by 88%, while the number of people employed in agriculture fell from 24.9 crore to 22.9 crore, CRISIL said.


Besides, it added, migrants from villages to urban areas, who benefitted from job opportunities in infrastructure and construction projects, increased remittances to their families in rural India, boosting consumption.


In addition, anecdotal evidence suggests that intra-state rural-urban migration rose in the second half of the last decade as job opportunities were created in urban areas by infrastructure and construction projects. Consequently, remittances to families in rural India would have boosted consumption. NSSO data suggests that nearly 72% of male migrants (seeking work) from rural areas to other parts of India sent remittances in 2007-08, the study said.


The study said a notable phenomenon in rural consumption is a shift from necessities to discretionary goods. About one in every two rural households now has a mobile phone. Even in India’s poorest states such as Bihar and Orissa, one in three rural households has a mobile phone. Nearly 42% of rural households owned a television in 2009-10, up from 26% five years earlier. Similarly, 14% of rural households had a two-wheeler in 2009-10, twice that in 2004-05, although penetration still remains well below the urban household penetration level of 33% in 2009-10. In fact, more than half of India’s stock of consumer durables such as television sets, electric fans and two-wheelers is now in rural India, CRISIL said.

Although social sector schemes have had a positive impact, the pressure on public finances will make it difficult to significantly hike such spending in future.  Dharmakirti Joshi, senior

director and chief economist, CRISIL, said, “To keep the rural growth story intact, the private sector will have to play a larger role, so that India can productively harness the rising working age population in rural areas. Government policies will be vital in enabling the private sector to create rural jobs.”


IndiGo, Jet Airways charged higher fares in July

DGCA data says IndiGo, Jet Airways and its no-frill arm JetKonnect charged an average of about 10-15% higher fares than other airlines during July

New Delhi: No-frill carrier IndiGo and Jet Airways have charged higher fares in several sectors than all other Indian carriers in July when the overall average airfares dropped due to lean passenger traffic, reports PTI.


According to data from the Directorate General Civil Aviation (DGCA) IndiGo, Jet Airways and its no-frill arm JetKonnect charged an average of about 10-15% higher fares than other airlines.


The DGCA fare analysis for July showed that there was an overall dip in air fares in the lean travel month compared to those in June.


The fares dropped in 37 out of 48 sectors, mostly to non -metro Tier-II and Tier-III cities. The analysis, however, does not include major trunk routes on which the airlines have most flights and carry most of their passengers.


While the highest fall in fares was recorded on Delhi- Gorakhpur route by Rs6.3 a kilometre, the highest increase was averaged at Rs2.1 per km on Mumbai-Nanded sector, the analysis showed.


On Delhi-Dibrugarh route, IndiGo charged Rs9,425 as the average one-way fare compared with the industry average of Rs8,361, while its average fare on Delhi-Dabolim (Goa) route was Rs7,836 compared with the industry average of Rs7,625.


Jet Airways charged Rs12,001 and JetKonnect Rs12,621 on Leh-Delhi sector, compared to the industry average of Rs11,013. The Air India fare on this route was Rs10,948.


Similarly, Jet's average fare on Port Blair-Delhi route was Rs10,377, compared to Air India's Rs8,027 and industry average of Rs9,182.


The high airfares have been a major reason for domestic air travel, recording the steepest fall in seven years in July when 45.4 lakh people flew, 10% less than 50.4 lakh recorded in the same month last year.


While airline officials blame the high fares on rising fuel cost and hike in user development fees in Delhi and Mumbai, a financial think-tank cited the sharp rise in airfares as a reason to slash its forecast on air passenger traffic growth this year from 11% to 7%.


"We now expect air passenger traffic to grow by 7% in 2012-13 as against our earlier estimate of 11%," the Centre for Monitoring Indian Economy (CMIE) said in its latest report.


Reliance Capital launches SIP for MF through SMS

Under the 'Invest Easy' initiative, investors will be able to start a SIP for mutual fund with Reliance Capital by sending an SMS through their registered mobile numbers

Mumbai: Reliance Capital Asset Management (RCAM) on Wednesday launched a systematic investment plan (SIP) in mutual funds through SMS under its 'Invest Easy' initiative, reports PTI.


As per the initiative, investors will be able to start a SIP by sending an SMS through their registered mobile numbers.


"SIP through SMS is the latest service offering from RCAM. This feature will make it cost efficient and convenient for over 900 million mobile users across the country to participate and make investments in mutual funds," Reliance Capital Asset Management chief executive Sundeep Sikka said in a statement.


This new feature has been launched under the company's 'Invest Easy' initiative, which aims to use technology for making it convenient for customers to invest in mutual funds.


"We already have over 2.5 lakh customers under the 'Invest Easy' initiative that allows investors to transact online on the net, on their mobiles, through call center and now using SMS. A large number of our customers are already migrating to the online platform and we see this number growing exponentially through this facility," Sikka said.


He said that the company would strengthen its reach among small-ticket investors through this initiative.


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