The rural demand in India, which had shown signs of recovery, is under threat again due to falling prices of key crops and unseasonal heat that could harm crops. According to executives working with consumer goods companies, the prices of key crops such as wheat and mustard are expected to decline in the current rabi season, leading to lower yields and returns for farmers. The adverse climatic conditions, including unseasonal heat, are also expected to impact crop production, further exacerbating the situation.
The prices of potatoes and onions have already crashed due to increased production, which is causing concern among farmers in those sectors. For instance, potato prices fell by 30% in January due to higher production in West Bengal and early harvest in Uttar Pradesh, the two states that account for half of India’s potato output. Similarly, farmers from Maharashtra’s onion belt are worried about the drastic fall in onion prices, which will leave them with lower disposable incomes.
Mayank Shah, Senior Category Head at Parle Products, said, “Crops which are currently under cultivation could be impacted, as there could be lower yields if temperatures rise further. This may lead to farmers’ incomes coming under stress, which could again negatively impact rural demand,” and added “As wheat is cultivated in different states of the country, it will be exposed to varying range of temperatures, which the industry is watching closely,”
Pushan Sharma, director – research, CRISIL Market Intelligence and Analytics, said: “We understand that rural consumption is expected to be under pressure if the heat wave pans out and there is severe damage to crops.”
Ajit Navale, general secretary (Maharashtra), All India Kisan Sabha said “The production cost of onion as per government agencies is Rs 8-9/kg, while the farmers are currently selling at Rs 4.50-6/kg,”
The consumer goods companies remain optimistic that the climate-related risks will be short-term, but the situation highlights the critical role of rural markets in the overall health of the FMCG sector. Rural markets contribute more than 35% to annual FMCG sales, making them a crucial part of the sector’s growth. However, the demand from the hinterland has slowed down significantly over the last five-six quarters due to the increased cost of staples, packaged food, fuel, and packaging, which have put pressure on household incomes.
The declining prices of wheat are one of the few positives for farmers, as wheat prices had touched record highs in the previous year. The Food Corporation of India (FCI) has begun heavy selling in the market at prices that are closer to the minimum support level of Rs 2,125 per quintal, leading to a downward trend in prices. This move could help alleviate some of the burden on farmers and stimulate demand in the sector.
The rural demand in India is facing significant challenges, including falling prices of key crops and adverse climatic conditions, which could further reduce the income of farmers. While companies remain optimistic, the situation highlights the critical role of rural markets in the FMCG sector’s overall health. The declining prices of wheat offer some hope for farmers, but the sector needs sustained government support to overcome the challenges and ensure sustainable growth.
