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Current Affairs

Rural demand may slip

Date: 18 November 2019 Tags: Basics of Economics


All the indicators which point out the health of rural economy have been showing decline. The consumption pattern shows that the meltdown of economy has indeed impacted rural growth patterns.



The government had decided to withhold the findings of the rural household survey, which had shown diverse results. The data indicated that the consumer demand had fallen to a 40 year low.



  • All the indicators of rural demand such as sales of FMCG, and of tractors and two-wheelers, in non-cities show they are still in decline.

  • Other indicators, such as a sharp fall in gold imports in the last four months (half of gold demand is rural-driven) also point to slackening demand.

  • The most critical factor behind rural stress is not just the fall in nominal wage rates of labour.

  • With CPI rising for rural labourers, real wages since March have also seen a decline. The real wage growth, adjusted for CPI-RL (Consumer Price Index-Rural Labourers), has seen the sharpest erosion in August.

  • With CPI-RL at 6.23%, even if nominal wages increased 3.4% in August, real wages eroded by 2.83%.

  • While some economists say excess and late monsoon in a few large states like Rajasthan, Madhya Pradesh, Karnataka, Maharashtra and Gujarat has suppressed farm incomes, others argue otherwise.

  • Lack of jobs due to poor or no investment over the years has meant poor incomes and rural to urban migration for work has hardly matched addition to work force.

  • Rural India accounts for roughly about 38-40 per cent of the total FMCG market. The slowdown in rural India is far more pronounced than in big cities and metros.

  • If the urban segment is growing 10 per cent, rural is growing five per cent and this may drop further to 3-4 per cent.

Consumer demand

Consumer demand is the willingness and ability of consumers to purchase a quantity of products in a given period of time, or at a given point in time.


Demand curve

  • In economics, a demand curve is a graph depicting the relationship between the price of a certain commodity (the y-axis) and the quantity of that commodity that is demanded at that price (the x-axis).

  • Demand curves may be used to model the price-quantity relationship for an individual consumer (an individual demand curve), or more commonly for all consumers in a particular market.

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