Subdued monsoons, FMCG sales in rural areas and Bitcoin is back in business

The federal brings you the most important financial and business events on Tuesday (April 11).

Weather forecast Skymet says the monsoon will be subdued this year

Skymet, India’s leading weather forecasting and agricultural risk solutions company, expects the upcoming monsoon to be “below normal” at 94 percent, for the four months from June to September. In issuing the 2023 monsoon forecast, it retained the January 2023 assessment which said rainfall would be below par.

Skymet expects northern and central parts of the country to be at risk of a rain deficit. Gujarat, Madhya Pradesh and Maharashtra will witness inadequate rains during the monsoon months of July and August. Punjab, Haryana, Rajasthan and Uttar Pradesh, the agri bowl of North India, are likely to observe less than normal rains during the second half of the season.

What it means: About 600 million people are directly dependent on the monsoon. Rain still feeds two-thirds of Indian agriculture rather than irrigation, indicating that India’s yields depend on it. Over 70 percent of the country receives rainfall between June and September, and any bad monsoon can seriously damage the farm industry, which accounts for 20 percent of the country’s GDP

This can significantly affect price growth because food price growth makes up 40 per cent of the consumer price index. It can also reduce the production of rice, sugar, cereals, pulses and other commodities. With the farm sector employing half of the country’s workforce, a poor monsoon will have an overall impact on the economy when India holds the 2024 Lok Sabha elections next year.

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FMCG sales in rural India exceed sales in urban areas

Recent media reports indicate that rural grocery store sales grew by nearly 17 percent in January-March of 2023, while sales in urban areas increased by just 7.9 percent over the same period.

What it means: Several grocery companies have expanded their reach among rural areas, which account for 39 percent of sales. It shows that there is more room for growth in this area. Given that growth in rural markets is expected to outpace urban markets for the foreseeable future, rural and semi-urban India will become more resilient over time.

Rural markets’ growth pre-Covid was stagnant as consumers’ propensity to spend more money was affected by poor monsoons and lower wages – the change in consumption can be attributed to reverse migration and government spending on key programs like MGNREGA. However, poor monsoon can greatly affect rural consumption; Therefore, to maintain the same growth, grocery companies may have to promote value packages because future revenue development in these sectors may be complicated.

Sales of electric cars will cross the 1 million mark in 2022-23

Sales of electric vehicles, especially electric scooters, grew over 150 percent to 1.15 million units compared to 1.09 million units the previous year.

What it means: The high sales were mainly due to the ₹ 10,000 crore FAME 2 (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) scheme, which incentivizes electric vehicle manufacturers and at the same time has been able to reduce EV prices by around 35 percent.

However, post-festival sales have fallen after the Center withheld over Rs 1,200 crore in subsidies to the electric car makers over allegations of violation of local procurement norms to claim subsidies. Therefore, this incentive can be withdrawn.

The Society of Manufacturers of Electric Vehicles (SMEV) has pointed out that 16 companies representing more than 95 percent of the industry want the faster resolution of FAME 2, which will help them tie up their business plans for the next financial year. In addition, relaxation has been sought in the PMP (Phased Manufacturing Program), which focuses on local procurement of components.

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Bitcoin crosses $300,000 for the first time since June 2022

A Bloomberg report has said that Bitcoin has climbed above $300,000 for the first time since June 2022, and has risen over 80 percent since the beginning of the year.

What it means: Bitcoin may be back in business even though its value was still down 50 percent from all time in November 2021. However, the cloud over it being an alternative to paper currency persists.

One of the reasons why Bitcoin is doing better comes from the failure of three US banks, which revived the idea among cryptocurrency advocates that it presents a more tempting alternative to conventional finance. However, it remains to be seen whether the rally will last for a longer period.

Meanwhile, there have been no updates yet from the Reserve Bank of India when India’s version of digital currency is expected to compete with Bitcoin, Ethereum and others. India’s Finance Minister Nirmala Sitharaman, while presenting the Union Budget during the previous one, had said that the country would soon have its digital currency.

Institutional investments in property remained strong in Q1 2023 at 1.7 billion dollars

According to multinational real estate firm Colliers International, the office sector continued to drive investment inflows accounting for 55 percent of total inflows during the quarter, followed by the residential sector with a share of 22 percent. Investment inflows into the office sector rose 41 percent over the same period to $0.9 billion, led by selected large deals.

Due to the strong growth prospects in the office sector, key institutional investors (funds, hedge funds) are entering into strategic partnerships to strengthen their presence and expand their office portfolio in India. As a result, investments from domestic investors increased 4X YoY during the quarter. Despite higher lending rates, domestic investors remained committed to residential assets during the quarter.

On the other hand, global investors remained inclined towards office and industrial assets and dominated the total investment inflows at 76 percent. The larger markets, such as Delhi-NCR and Bengaluru, attracted 1/3 of the total investments during the quarter, led by increased activity in these markets.

However, the most inflow (63 per cent) was through agreements in several cities. Global institutional investors’ appetite for office assets remains strong due to India’s growing talent pool, digitization, increased transparency in deal structures and stable returns. Foreign investments accounted for approximately 93 per cent of the total investments in office assets during the 1st quarter of 2023.

Company book launch: The book ‘Lala Shri Ram: The Man Who Saw Tomorrow’ is written by Sonu Bhasin, a Tata Administrative Service Officer, who was previously Director of ING Barings Private Banking, President of Axis Bank, Group CEO of Yes Bank and COO of Tata Capital Limited. The book chronicles the life and times of Lala Shri Ram, synonymous with DCM, who overcame initial business failures and fragile health to build a solid business empire, ranked among the top five in the 1960s.The federal brings you the most important financial and business events on Tuesday (April 11).