Road construction continues to be strong: The construction of road infrastructure (rural roads) has seen a healthy jump to 45-50,000 km/year from 30,000 km/year a few years ago. Among states, Odisha, Madhya Pradesh, Bihar, UP and Rajasthan accounted for 50 per cent of the roads constructed over the last four years. Improved road infrastructure is reflecting in increased demand for automobiles and driving initial signs of a shift from motorcycles to scooters in rural hinterlands.

Rural housing completion varies significantly across states: Rural housing under PMAY-G is one of the government’s flagship schemes and has been a key driver of demand for cement, building material and electrical appliances. In terms of completion, the scheme has envisaged the construction of 10 million rural houses by March 2019. As of early October 2018, 5.1 million houses have been completed. However, 8.8 million households have received the first installment and given that the construction of a typical house takes 3-4 months, there is a high probability of reaching near-completion by March 2019. The key laggard remains Bihar in terms of completion of houses. However, compared to the last rural safari, JM Financial could see heavily improved dissemination. Furthermore, with the sand mining ban-related challenges over, the state could see house construction over the next few months.

Increased electricity access benefiting North and East India: In our past rural safaris, JM Financial noted the improvement in electricity access, quality (fewer voltage fluctuations) and duration, particularly in Bihar and Uttar Pradesh (combined over 300 million people or 25 per cent of India’s population). For the overall country, government data indicates that only 16 million or 8 per cent of households remain bereft of electricity access (October 2018).

At an all-India level, 67 per cent of households have been electrified until 2011, which improved to 85 per cent by October 2017 and 92 per cent by October 2018. The most dramatic changes have been witnessed in Bihar (from 16 per cent in 2011 to 96 per cent in October 2018) followed by Uttar Pradesh (37 per cent in 2011 to 72 per cent in October 2018).

As the electricity availability increases to 17-18 hours/day as against 7-8 hours/day earlier, people are driven to use electrical and electronic devices and have more time to operate businesses, which aids income growth.

Brand awareness is also increasing in these regions and people consider companies such as Havells, a premium brand in northern Bihar and in Uttar Pradesh. Also spotted are several organised consumer durables stores in these states. As electricity access improved, stores have also been set up in smaller towns. Aditya Vision is one such player based out of Patna, with 32 stores across the state.   
Source: JM Financial