Fuel sales have risen sharply. And a reopening of an estimated 70 per cent of India’s 12 million neighbourhood stores is feeding the rising demand for everything from commodities to daily essentials to smartphones and even passenger vehicles. These indicate that consumer sentiment is reverting smartly from its Covid-induced lows.
The lifting of Covid-related restrictions on movement of people and goods and the unlocking of several states is boosting India’s economy quite visibly.
Fuel sales, which are considered a proxy for economic activity, and the consumption of fast moving consumer goods (FMCG) and consumer durables, which are good indicators of consumer confidence, showed a significant surge in June and July when restrictions across most of the country were lifted.
According to data from India’s state-owned oil marketing companies, petrol sales during the first half of the month (June 1-15) jumped 13 per cent, compared to the corresponding period in May, indicating a perceptible increase in personal mobility.
Petrol is almost exclusively used by individuals to power their personal vehicles. Diesel sales also rose a robust 12 per cent during the period under review, compared to the same period the previous month.
READ MORE ON INDIA & ECONOMY:
Although a significant number of private four-wheelers now run on diesel, the commercial fleet in India runs almost completely on this fuel. Hence, it is used as a measure of business activity.
A caveat: The sales figures for petrol and diesel in the first half of June is till 3.5 per cent and 7.5 per cent lower than the figures for the corresponding period last year.
It may be noted that fuel sales had fallen in May to their lowest level since August last year as the second wave of the Covid-19 pandemic took its toll on India and brought economic activity to a near halt. So, the month-on-month rise in retail oil sales is a definite pointer to the rising graph of economic activity in the country.
The public sector Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) own 90 per cent of petrol pumps in India. Therefore, their sales data is considered sufficient to gauge overall fuel demand in India.
Providing further evidence of a robust recovery underway in India is an unlikely source. The reopening of India’s kirana stores, neighbourhood mom-and-pop stories that stock everything from groceries and toiletries to electrical goods and electronic appliances, among many other things, is boosting demand as consumers flock to them to buy daily necessities as well as satisfy pent-up demand.
According to reports in the Indian media, FMCG sales jumped sharply by 30.3 per cent in the first two weeks of July, compared to the corresponding period last year, a study by Bizom, which tracks 7.5 million kirana stores across India, said. India has an estimated 12 million kirana stores, almost all of them in the unorganised sector.
This growth was primarily driven by personal care products and commodities, though most other categories also recorded a significant uptick in offtake.
“FMCG sales indicate that consumption has recovered completely from the pandemic-driven impact with a strong start to second quarter,” Akshaya D’Souza, Chief Marketing Officer at Mobisy Technologies, which owns Bizom, told the media.
The July figures were a continuation of the trend seen in the first half of June when FMCG sales expanded smartly by 15 per cent. The ballast for this growth was provided by a 28 per cent increase in the number of kirana stores that reopened during that period, Bizom said.
Sales of smartphones, refrigerators, air-conditioners and cars as well as essential goods recovered at their fastest pace in a year in the first half of June as more parts of India unlocked its markets. An estimated 70 per cent of all markets across India were open and running in the first half of June.
In many of these markets, offtake rose sharply by as much 30-40 per cent compared to the corresponding period last year as pent-up demand drove up sales, dealers said.
In fact, reports coming in from a handful of companies on their July sales indicates that this trend is holding. According to media reports Parle Products, India’s largest biscuit maker, is operating at full capacity and is actually facing shortages in some markets as demand outstrips expectations.
Passenger vehicle sales also witnessed a more than 50 per cent growth in the first two weeks of July compared to the corresponding period last year.
READ MORE ON INDIA & RETAIL:
Shashank Srivasatava, Senior Executive Director at India’s largest car maker Maruti Suzuki told ET, a leading Indian financial daily: “There is a quick turnaround in sentiment from the depth of panic in April to resilience shining back in July. The bookings, retails and deliveries are all moving in a positive direction and the supply side is also smoother, barring a few variants on component supply challenge.”
Vinkesh Gulati, President, Federation of Automotive Dealers Association, went a step further and emphatically told the media: “The passenger vehicle segment is back to pre-pandemic days.”
Not everyone is so confident, though. “As an industry, we were expecting 30-40 per cent sales growth this year taking us closer to the 2018 numbers. But nobody had anticipated the second wave at that time. Now, with what has happened, it will not be possible to get 30-40 per cent growth. There will be growth over last year, but we expect it to be 20 per cent,” said Rajeev Chaba, President and Managing Director of MG Motors in an interaction with PTI.
"The drop in coronavirus cases has not only boosted consumer sentiments but also helped the supply chain recover from the Covid-19-induced disruptions. We are seeing a tailwind for our healthcare portfolio, particularly in rural India, with demand growing for chyawanprash, honey and immunity-building Ayurvedic products," Dabur India CEO Mohit Malhotra told CNBC-TV18.
The revival in rural India, which was badly impacted by the second wave of Covid, has been patchy. According to Bizom, many people out in the hinterland have downtraded to lower priced products in all categories except commodities.
“High-value products have seen a drop in share across all categories except commodities. There's been a significant price rise of up to 60 per cent in various edible oil products which has increased customer price of products significantly leading to them having to buy higher-priced products. It does seem like the rural consumers are saving for emergency spending on healthcare while being cautious about all other spends currently," D’Souza told the media.