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Why is falling inflation making so little difference to consumer spending? One explanation could be that Indian consumers have been so thoroughly singed by the double- digit inflation rates of the previous six years that they’re not loosening up their purse strings yet. This could mean that the additional disposable income in the last one year has been flowing into savings, rather than spending.
But that doesn’t provide an explanation for why consumption has been actually weakening in
recent quarters. Nor does it explain why consumers were on a spending spree during the high inflation years until 2011-12.This leads us to the other explanation- the state of the rural economy.
Most consumers – goods makers admit that the great Indian consumption boom between 2007- 08 and 2011-12 was powered mainly by aspirational rural consumers. This period mainly by aspirational rural consumers. This period not only mainly by aspirational rural consumers. This period not only saw rising rural consumers. This period not only saw rising rural demand for FMCG goods such as branded hair oils, shampoos and creams, but also brisk uptake of motorcycles,tractors,cars and consumer appliances.NSSO surveys of household consumption for part of this period also support the view that rural consumers spent much more than their urban peers.
There were three drivers of the rural income boom from 2007 to 2012.One, sharp hikes in the minimum support prices of key food crops by the pro-farmer.UPA lent considerable support to farm incomes in this period, resulting in favorable terms of trade for agriculture for the first time in many years.
Two, the UPA regime also delivered another boost to rural prosperity by ushering in the
MGNREGA.The programme didn’t just guarantee minimum employment to non-farm workers, it also set a floor on the wages they could earn.These two factors sharply bolstered rural incomes and actually resulted in a transfer of wealth from inflation-hit urban consumers to the growers of food products, who benefited from higher prices.
A third, less- acknowledged factor was soaring global prices of agricultural products. Led by
recurring shortages in global food and feed products and demand for bio-ethanol, global food crop prices valuated by 137 per cent (in absolute terms) between 2002 and 2012,after falling by 8 percent over the previous 10-year period.
This trickled down to Indian farmers as well, by expanding their realisations for cash crops such as cotton, corn, oilmeals, rubber, tea, coffee and so on. Contrary to popular perception, India’s agricultural sector does have significant global linkages both by way of imports (cerals, pulses, sugar, cooking oil) and exports, High realizations and rising demand saw the country’s agri-product exports vault four-fold from $10 billion to $40 billion between 2006 and 2012.
1). What were the reasons of vault in export of agri-products between 2002-2012?
(A) Realisation for cash crops such as cotton, corn, oil meals, tea, and coffee expanded
(B) Global linkage of India’s agricultural sectors in both exports and imports
(C) MGNREGA bolstered rural income and led to flow of urban money to the rural sector.
a) Only (A) and (B)
b) Only (B) and (C)
c) Only (A) and (C)
d) All (A),(B) and (C)
e) None of these
2). What, according to the passage, is the reason behind the reluctance of Indian consumers to spend despite dwindling inflation?
a) Indian consumers are fond of hoaring disposable money.
b) Indian consumers have been thoroughly signed by the double-digit inflation rates.
c) The additional disposable income of Indian consumers is in fact flowing into savings.
d) Both rural and urban people are uncomfortable in spending their money lavishly.
e) None of these
3). How did the state of rural economy influence the rising expenditure overall 2011-2012?
(A) It was found out that the cause of the boom in expenditure until 2011-12 was
A rise in aspirational rural consumers.
(B) Consumption of FMCG goods in Indian rose high among rural consumers
Against their urban peer despite high inflation.
(C) Rural consumers spent much more than their urban peers.
a) Only (A) and (B)
b) Only(B) and (C)
c) Only (A) and (C)
d) All (A),(B) and (C)
e) None of these
4). What is the meaning of the phrase ‘trickle down’ as used in the passage?
a) To plug the leakage of money
b) To be distributed to someone in little bits.
c) To harm someone a lot
d) To decrease at a rapid rate
e) None of above
5). Which of the following were the boosters of the rural income boom from 2007-2012?
(A) Rise in the minimum support price of key food crops by the UPA govt
(B) Guarantee of a minimum employment by MGNREGA
(C) The demand for bio-ethanol.
(a) Only (A)
(b) Only (B)
(c) Only (C)
(d) Only (A) and (B)
(e) All (A), (B) and (C)
Directions (Questions.06-08): Choose the word/group of words which is MOST SIMILAR in meaning to the word/group of words printed in bold as used in the passage.
6). Spree
a) Wild activity
b) position
c) careful
d) system
e) expedition
7). Peers
a) salesman
b) counterpart
c) relatives
d) businessman
e) kids
8). Ushering
a) neglecting
b) ceasing
c) finishing
d) closing
e) launching
Directions (Q.9-10): Choose the word/group of words which is MOST OPPOSITE in meaning of the word/ group of words printed in bold as used in the passage.
9). Brisk
a) energetic
b) vigorous
c) sluggish
d) speedy
e) quick
10). Bolstered
a) reinforced
b) sustained
c) strengthened
d) weakened
e) supported
