The open secret of India's rural and urban shops

It’s happening: domestic consumption, that last bastion of growth in the Indian economy, is slowing down.

Admittedly, it’s not such a huge shock because a slowdown has been visible across several segments of the economy: credit demand has slowed; industrial output has contracted and exports have come off.

In the first of a series of surveys measuring consumption trends in the country, Emkay Global found that demand, according to certain indicators, was definitely slowing down.

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How did they find that out? By checking the manufacturing dates of inventories in various hypermarkets across Mumbai. The older the manufacturing dates on the stocks, the lower the demand was estimated to be.

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The survey covered 37 popular products in the fast-moving consumer goods basket between 28 November and 30 November.

According to Emkay, the average manufacturing dates were found to be around 17 September, or about two and a half months old. Only milk and noodles stocks were found to have relatively recent manufacturing/production dates of about 1.5-2 months ago.

Older stocks - made more than two months ago- were noticed in products like hair oil and toothpaste. In terms of companies, Nestle, Marico and Britannia fared relatively better because they are in the foods segment.

Overall, the survey certainly suggested that there is a slowdown in fast-moving consumer goods, at least in Mumbai. We’ll have to wait for the next surveys to see if the trend is true for other parts of India as well.

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In all likelihood, the slowdown in demand is not confined to urban areas. Jefferies, in a report titled “Off the rural horse” released earlier this month, said that many rural indicators have also been pointing to a change for the worse.

Agricultural credit is now at a decade low; more worryingly, agricultural non-performing assets have risen sharply. The latest data for fast-moving consumer goods companies show a clear deceleration, with rural growth numbers sliding behind urban growth.

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In addition, the key drivers of rural demand - minimum support prices and spending on NREGA (a government sponsored employment scheme) are not as strong as before.

Still, it must be remembered that rural India consists of up to a million villages with a combined population of more than 700 million people. A truly representative survey perhaps needs to cover a much wider sample. In addition, it needs to cover spending on products like tractors (on which data is much more difficult to get) to get a true picture of overall rural spending.

Nevertheless, the conclusion seems inescapable: India’s consumers are starting to get weary of shopping.