Uncertainty over the monsoon weighs on gains from lower oil prices

MUMBAI: Oil prices have fallen enough to prompt some analysts to cut India’s headline inflation forecasts for the fiscal year, but uncertainty over the path of the monsoon is prompting consumer companies to ease their growth forecasts. Companies with a broad footprint hope that the diversified product range will help them offset some of the losses caused by the expected slowdown in rural consumption. Overall, there is consensus that discretionary spending in rural areas is likely to be affected, but the progress of rainfall will be key in determining the extent of the impact. To give some context, India’s rural areas contributed about 60% to the country’s overall consumption growth as of 2022-23, said Dharmakirti Joshi, chief economist at Crisil, citing household consumption expenditure data.

The monsoon has been delayed this year, and rains have been about 43% below normal so far, threatening the planting of kharif crops. In Mumbai, where the monsoon hit in late June had the second-most rain delays on record, authorities imposed cuts on water supplies for commercial establishments. “Rural consumers may adopt a more measured approach towards non-essential spending so that there is greater clarity on rainfall distribution and progress of the crop season,” said Mayank Shah, chief marketing officer, Parle Products.

The outbreak of new riots in the West Asia region over the weekend could destabilize overall morale, harming long-term peace prospects. “Any pressure on farm production and profits is likely to impact consumption in rural areas, with broader implications for demand and growth for fast-moving consumer goods,” said Piroz Khambatta, Chairman of Rasna Group, which recorded strong sales of summer produce on the back of late onset of rains. While a degree of caution may be observed until rainfall patterns stabilize, rural consumption has historically shown resilience when monsoon conditions improve over the course of the season, said Kaleswaran Arunachalam, CFO of Crompton Greaves Consumer Electricity Group. Ikra said developing El Niño conditions could disrupt demand in rural areas, impacting revenues of a large section of the corporate sector, which registered healthy revenue growth in Q4FY26. Jyotirup Barua, head of confectionery business at DS Group, said growth rates may vary across rural areas depending on the monsoon performance.