BNP Paribas Pushes Out Hope for Consumption Revival in India
“In the calendar year 2020, government spending will at best be able to maintain the status quo in rural demand,” BNP Paribas said
(Bloomberg) -- The expectation for India’s consumption to recover in 2020 is getting pushed out further as the nation’s slowest economic expansion in 10 years led to a deceleration in local consumer staples sales for the sixth straight quarter, according to BNP Paribas SA.
“There is a lack of meaningful catalysts for consumption to recover to its potential” in the year to Dec. 31, Kunal Vora, a Mumbai-based analyst at BNP Paribas Securities India, wrote in a note to clients. “A sustainable recovery in rural income growth and a sharp up-tick in consumer sentiment index are necessary for a recovery.”
The brokerage last month turned negative on the consumer goods sector, pointing out that lower raw material prices and tax cuts were masking underlying weakness in sales. Consumer sentiment in the nation has worsened to an almost five-year low while manufacturing slack at companies widened to the most on record, data from the Reserve Bank of India showed this month.
The federal budget for the year starting April 1 didn’t offer much in terms of big-bang stimulus to boost rural incomes. According to the BNP note, the three months to Dec. 31 marked the sixth consecutive quarter of moderation in aggregate revenue growth for consumer staples, and management commentaries indicate companies are uncertain about the timing of recovery.
“In the calendar year 2020, government spending will at best be able to maintain the status quo in rural demand,” it said.
--With assistance from Anirban Nag.
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