Cos: Healthy rains, lower inflation to boost spends

MUMBAI/NEW DELHI: Predictions of a healthy monsoon and easing retail inflation will spur demand in consumer segments, such as FMCG, two-wheelers, cars and tractors as the crucial rural economy will gain strength, while positivity spills over to the broader economy and urban centres, company executives and experts say.

The upbeat mood builds up even as the industry remains cautious of the outcome of India's trade talks with the Trump administration, which - if successful - will be an added impetus to growth.

Sluggish spending over past few quarters has weighed in on consumer businesses. Even as rural purchases have stayed steady, consumer goods companies and retailers struggled with slow demand in urban areas, where lower middle-class cut discretionary spends over inflationary concerns.

"The last two quarters have seen significant slowdown, impacting consumption, owing to overall inflation as well as other macro-economic factors. With ease of retail inflation, coupled with direct tax reforms in this year's budget, we expect increased middle-class spending and recovery in urban demand from third quarter (July-Sept) onwards," says Manish Anandani, MD at Kenvue that makes products like Johnson's Baby and Listerine.

The farm sector is particularly hopeful on rains. "A normal monsoon has always been very positive for the agri economy and for tractors. The latest forecast from both IMD and Skymet is very encouraging. We look forward to the upcoming Kharif season," says Hemant Sikka, president of farm equipment sector at Mahindra & Mahindra, the country's biggest tractor seller.

Raman Mittal, joint MD at International Tractors (Sonalika Group), says that timely arrival of monsoons and its intensity plays a pivotal role in uplifting farm sentiments over strong harvest and improved cash flows. "FY25 saw record production in both Kharif and Rabi seasons, driving tractor sales in the second half, with full-year sales growing by double digits. With El Nino unlikely to return in 2026, strong rural demand, combined with favourable seasonal rains, should accelerate tractor sales and energise allied agricultural activities."

Kumar Rajagopalan, CEO at Retailers Association of India (RAI) hopes that low inflation can boost consumption, which grew at a milder 4-5% pace last year. "The tariff war is a worry as there's no certainty about how things will unfold, although India seems to be in a better position as of now."

Mayank Shah, VP at Parle Products, says good monsoons should continue to support rural demand, besides boosting crop output that eventually will help keep input prices stable and domestic inflation under check. Shah expects the foods segment to see a 12-13% growth this year "if the macro environment remains stable".

Zydus Wellness expects growth in its food, nutrition and personal care categories to pick up on the back of easing inflation and estimates of good monsoons. "With moderating food prices, household purchasing power is expected to improve significantly, particularly in rural India where farm incomes have risen by 5% annually over the past decade and could rise more this season," Rachit Vohra, senior director (sales) at Kellanova India, says.

Hemal N Thakkar, senior practice leader and director at Crisil Intelligence, says he expects "the momentum to continue" for the domestic tractor as well as two-wheeler industry, which posted healthy growth last fiscal. "This is on account of healthy rabi cash flows as well as the tax relief for income up to Rs 12 lakh. With the prediction of normal monsoons, the sentiments would definitely be positive and we may end FY26 at lower single-digit growth for tractors and a 7-9% growth for 2Ws in terms of domestic sales."

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