₹1 lkh crore poll spend not enough for the hinterland

Rural consumption will require further support measures from the new government as well as a sustained capital expenditure push to get broad-based in the next few quarters, economists said, indicating that the upcoming general election is unlikely to provide a significant lift.

In the passenger car and two-wheeler segments, which have seen an upswing in demand in recent months, industry executives said it is broader economic growth rather than elections which will give further impetus to sales. “After the election, if the government does announce some measures to correct demand, perhaps consumption demand will also pick up. Easing inflation pressures is also expected to give some leg-up to real wages,” said Paras Jasrai, senior analyst, India Ratings and Research.

India will hold the general election in seven phases between April and June. A spending of about ₹1 lakh crore is expected.

In 2023, the government extended the free food grain scheme for five years and recently provided further relief in LPG prices. Jasrai said more can be done by rationalising GST rates and increasing allocations to PM-Kisan minimum income support scheme for farmers and rural schemes, including wages under the MGNREGA.

“A sustained focus on capex will indirectly support demand,” said Rajani Sinha, chief economist at CareEdge.

Economists said a normal monsoon and lower rural inflation will also be pivotal to recovery getting broad-based. “In FY25, we expect rural demand to be supported by better monsoon,” said Gaura Sengupta, economist, IDFC First Bank.

If the normal monsoon conditions persist, the government may not have to do much, according to economists. “Rural-led demand recovery will gradually build up going into the next fiscal year,” said Yuvika Singhal, economist, QuantEco Research.

Rural running ahead

Data released last week showed a contraction in non-durable production in January. Sinha said this was, in some ways, reflective of the economy’s lack of broad consumption demand.

Automakers also do not expect a huge boost in sales during elections. “Sales data in the last 25 years shows no real correlation with election year phenomena,” said Shashank Srivastava, senior executive officer (marketing and sales), Maruti Suzuki.

Roy Walsh

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