Weak Rural Economy

India's rural economy is going to remain weak in the current financial year because of government's slow policy reforms. The rural income growth has been stuck at single digit in 2015 far below the 20 per cent plus rates in 2011. The slower income growth is due to increment in fiscal restraint and this is going to remain unchanged in the coming quarters.

Farmers are expecting sugarcane prices to be higher this year, but sugar mills are paying  20 per cent less than previous year. The other crops like cotton, soybean and rubber are also hit due to unpredictable weather conditions in the last year. There is a risk of below average monsoon rainfall in the current fiscal. Agriculture contributes around 17 per cent to the Indian GDP. Therefore GDP of India will be impacted and will deteriorate the growth. 

According to Moody's survey, sluggish reform momentum was quoted as the greatest risk at 47 per cent to India’s macroeconomic story over the next 12 to 18 months, followed by infrastructure constraints at the second place at 38 per cent and external shocks at the third place at 10 per cent. The increasing inflation after a period is the fourth and the fiscal performance is the fifth concern.

Tractor manufacturer Mahindra & Mahindra is idling its factories for a few days a month after sales slipped by nearly a third towards the end of last year. Consumer goods firms and auto makers have also reported weak sales.