Executives at these companies say elections typically lead to an increase in government initiatives, which, in turn, spur rural incomes and liquidity.
Elevated food prices and below-average monsoons have delayed a sustained rebound in the rural economy, Marico, Dabur and Godrej Consumer Products noted in their September quarter earnings’ calls.
Sales push
“With the election year approaching, we expect to see some fiscal stimulus being doled out for the rural sector. This augurs well for rural consumption,” said Mohit Malhotra, chief executive at Dabur. The packaged consumer goods maker gets close to half its annual sales from the rural markets.
During elections, political parties are known to dole out various incentives – especially in rural areas – to garner support, such as subsidies on small housing loans and programmes for free grain. There can be direct cash transfers of up to Rs 8,000, or policy moves such as Wednesday’s increase in dearness allowance for government officials/pensioners, and the recent hike in minimum selling price for some rabi crops.
All of these lead to increased disposable incomes.
“Be it assembly or general elections, they have a positive impact on auto retail,” said Nikunj Sanghi, past president of Federation of Automobile Dealers Association. “Government spending goes up around this time and a lot of vehicles are needed for electioneering. Both factors have a positive rub-off on sales.” Sanghi is managing director at JS4Wheel Motors, a dealer for Mahindra & Mahindra and Hero MotoCorp.
Consumer companies are responding to the potential spurt in demand with plans to add low-unit packs, deepen distribution and promotions to spur demand.
Mayank Shah, senior category head at biscuits maker Parle Products, said, “We are very hopeful that elections-led stimuli such as incentives and bonuses will lead to higher demand.” Shah said rallies and canvassing are healthy consumption events. “We will ensure availability of lower priced packs, distribution and reach,” he said.
Speeding up
Car manufacturers are especially hoping for a push at entry-level.
According to industry estimates, auto retail sees an uptick of 7-10% from a couple of months before the elections.
