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Systematix Research Report
Q1 FY25 results of consumer companies, both staples and discretionary experienced subdued demand even as they hope for better future on the back of rural revival and festive demand.
We present a collective analysis of the recently released survey data of urban workers and households (RBI Consumer Confidence,) along with the contextualization of industry-level data, retail lending of banks, ITR filing, rural wages, government revenue spending, corporate spending on employee compensation and agriculture sector outlook.
The emerging picture indicates that the household situation has weakened further in recent months with real income continuing to decline thereby extending the structural drag explained in our earlier research on annual surveys of PLFS, unregistered enterprises (ASUSE), RBI's KLEMS data and household consumer expenditure survey.
While the prospect of a better monsoon is a silver lining, we anticipate higher government spending towards uplifting rural income, specially at the state level, to be the key driving factor out of the structural drag. For the moment, falling real HH income, capturing 78% of GDP implies a gradual recovery at best; it will continue to be a drag on the real GDP growth and the banking sector.
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