Indian farmers crippling spending capabilities
India is suffering one of its driest summers in decades and Indians in rural areas are putting off spending due to concerns about the coming harvest and in consequence they are hurting small businesses
Small Indian businesses are suffering from the limited buying attitude of spending in rural areas and if they spend they want to do it on credit.
The spectre of a drought hanging over major tracts of farmland across India (monsoon rains have been about a fifth below the long time average) isn’t just bad news for crops but it could also pour sand into the Indian economic engine, because rural consumer spending has been a big driver of growth for the Indian economy with a share of over 50 % (and accounting around 70% of the total Indian population). And instead of buying new pumps, farmers rather prefer to have their old fixed and instead of the need to buy a shirt the old one is worn for another two to three months. For instance sales of motorcycles and scooters account for 45 % coming from rural customers. Agriculture accounts for about 17 % of India’s GDP. In the first three months of 2012 India’s GDP grew only 5.3 %, its slowest rate in almost a decade. The Blufin, a consumer confidence index of a Mumbai based financial research firm, showed in July a value of 41.1 out of a maximum of 100 points. A value below 50 indicates that consumers defer purchases of big-ticket items such as motorcycles, TV sets or mobile phones. Inflation is also in double digits and thus all of the mentioned factors are leading to the fact that people have less money to spend.