5 Factors that will make ‘BHARAT’ drive India’s recovery from Covid-led economic crisis

With India’s 65% population being rural and with 50% of India’s population being dependent on agriculture for its livelihood, a good harvest season coupled with changes in macro-economic factors, will lead to rise in rural demand (and spends). In turn, it is a likely to positively impact India's economic recovery.

Land, Labour and Capital are at play to help agrarian India’s productivity momentum. Let’s see, how India’s rural economy will be the growth engine to pull Indian economy out of covid-led sluggishness

1.      Increase in area under cultivation (Land): The Rabi crop, which is harvested in March-April period, saw 8.6% increase in cultivation area. Wheat along with gram, peas and barley, are the primary crops in this season. With the early onset of Monsoon across the country and likelihood of above average and uniform rainfall receipt, the Kharif crop too is likely to see a bumper harvest, lifting up the production of crops like maize, rice, cotton amongst others.

"India's food grains production to touch record 295.7 MT in 2019-20 crop year" - Agricultural Ministry

2.      Farm Labour Deployment in the hinterland: The labour migration kicked off with lockdown 2.0 setting in, created initial woes for the Rabi harvesting season especially in states like MP, Chhattisgarh, Rajasthan and Punjab. However, returning workers from cities to these states, relaxation of intra-state labour movement followed by selective movement across neighbouring states, led to rather marginal reduction of labour input cost. Tractor’s domestic sales in May 2020 was marginally better vis-à-vis May 2019’s sales, which is a positive indicator depicting revival of good harvest season.

3.      Agri-schemes and benefits for farmers (Capital): Hike in MSP for Rabi crop, increase in MGNREGA wage rate and allocation of Rs 2 Lakh Crore through Kisan Credit Card will definitely have a positive impact on the overall agrarian economy.

Macroeconomic & External Factors 

4.      Above average Monsoon – If extended rainfall has aided this year’s Rabi crop, arrival of timely and above average monsoon will further boost Kharif crop in India in 2020, delivering requisite booster shot to the agrarian economy.

5.      Amendment of archaic laws –

• From suspension to Amendment of 19th century labour laws by various state governments, industries and farms will now be able to deploy longer working hours, introduce variable compensation models and scale up (and down) as per the demand and season cycles. Arguably, its impact will be seen more holistically once post normalization, but its immediate impact is most likely lead to higher productivity rate.
• Amendment of Essentials Commodity Act led to delisting of commodities like pulses, cereals, oilseeds, edible oils etc. from the list of regulated essentials commodities, making farmers sell their produce beyond the notified mandis, eventually opening up avenues for proverbial farm-to-fork supplies a reality.

Recommendations for brands to maximize dividends

If you are serving Bharat and if you are part of Durables, CPG, Automotive or Fintech industry, be ready to reap the dividends from the forthcoming upswing around Q3, lasting well over Q4. 

The brands who remained invested during these times are likely to reap more dividends than others. Remaining invested can be in one or more of the following areas leading to multiplier effects in forthcoming economic cycle –

1.      Communication with empathy: If you are a brand, who have communicated with empathy with your audience and have invested in marketing communications, such brands chances of being in consumer consideration set is relatively higher.

2.      Taking care of channel partners: Your first line of interface often swings consumer opinion in your favour. Brands who stood by their retailers and distributors might have a better chance to encash higher sell through in the coming quarters.

3.      Extended Service and Support: Often considered as a thankless domain and a cost center, a consumer tend to trust those brands more, who continue to extend support and services in difficult times resulting into long-term and positive customer experience.