'Rising wages makes consumer goods more affordable for rural households'

Mumbai: Rise in discretionary spending and low level of price rise in consumer durables have resulted in higher affordability of these articles for rural households, says a Crisil report. However, it cautioned that Yet, the report said, the loss of potential demand for such items due to poor infrastructure was significant.

“Consumer durables have become more affordable to rural households in recent years, due to rising discretionary spending and relatively low levels of price rise in durables,” the report says.

It also states that at least one in every two rural households owned a bicycle, an electric fan and/or a mobile phone in 2009-10. The report, however, points out that the penetration pattern of consumer durables varies distinctly in rural areas, “clearly indicating that even though higher income is a necessary factor, it is not the sole factor, influencing purchase decision for durables.”

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[caption id=“attachment_531143” align=“alignleft” width=“380”]  While Kerala and Punjab bagged the top spots in terms of the highest discretionary rural household spending, it grew higher than the national average in Maharashtra, Bihar, Gujarat and MP. AFP[/caption]

The report says discretionary spending grew to Rs 24,000 in 2009-10 from Rs 14,000 in 2004-05, a growth of over 11 percent per year, which was higher than inflation and rose about 6 percent per year over the same period.

While Kerala and Punjab bagged the top spots in terms of the highest discretionary rural household spending, it grew higher than the national average in Maharashtra, Bihar, Gujarat and MP.

The report also notes that discretionary rural household spending grew at lowest rates in Andhra, Bengal and Karnataka. On the availability of electricity and its impact on some of consumer durables, the report says access to electricity will play a major role in expanding penetration of these goods.

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The report said, “In future, while rural households in relatively poorer states could enjoy higher affordability levels towards purchase of consumer durables, improving access to electricity will play a more critical role in expanding penetration of these goods.” It said this will especially hold true for Bihar, Bengal and Uttar Pradesh.

The report also says lack of good road connectivity adversely affects penetration levels of two-wheelers, cars and jeeps.

“While several factors, including availability of finance determine penetration of two-wheelers and cars in rural areas, an improvement in rural road network could enhance demand for these items,” it stated.

Better connectivity through the Prime Minister’s Rural Raods Scheme appears to have positive impact on auto sales, it added.

The report adds that apart from raising rural incomes, boosting rural infrastructure will help unlock higher demand. “In times to come, in addition to higher incomes, improved access to electricity and roads will be key determinants of demand for consumer durables in rural areas across many states,” the report says.

Rural households in richer states such as Kerala and Punjab are likely to move further up the ladder and purchase more high-end durables goods, such as refrigerators, ACs, four-wheelers and digital cameras in future, it added.

PTI