New Delhi, July 3: Ratings agency ICRA expects a 12-14 per cent year-on-year volume growth for the two-wheeler industry in FY22 supported by the festive season as well as rural demand.

"While the overall consumption and investment demand may take some time to recover after the devastating second wave, India's rural economy is expected to provide some support," ICRA said in a research note.  Business News | Targeting EV Adoption, Aventose Energy's Electric 2-wheeler Enters Pre-production Stage

"Expectations of a healthy rabi production, timely arrival of the monsoons, a hike in minimum support prices for kharif crops and other income support schemes by the Government are likely to help revive rural demand sentiments and support the two-wheeler offtake in the festive season," it said.

According to the ratings agency, continued preference for personal mobility solutions amid the pandemic would also drive-up some demand.

"Even as the pace of domestic demand recovery remains uncertain, the steady growth in two-wheeler exports is encouraging and is expected to support the industry volumes in FY2022," the note said.

Besides, taking a cue from the high-frequency indicators of economic recovery following the second wave, ICRA had moderated its GDP growth forecast in June 2021 to 8.5 per cent YoY for FY2022.

ICRA noted that despite the uncertainty over a possible third wave of the pandemic, it continues to maintain a 'Stable' outlook for the two-wheeler industry.

It said that a low base, healthy rural cash flows, and continued preference for personal mobility would support two-wheeler demand in the festive season.

Nevertheless, the same would be closely linked to the pace of the vaccination drive and demand disruption due to the resurgence of COVID-19; uneven monsoons or volatilities in exports could pose downside risks to the current estimates.

Rohan Kanwar Gupta, Vice President and Sector Head, Corporate Ratings, ICRA, said: "The extensive localised lockdown measures, implemented due to the second wave between April and June 2021, were almost akin to the nationwide lockdown last year.

"Unlike the first wave, the surge in infections in non-metro and rural hinterlands dampened rural consumer sentiments. This reflected in a sharp sequential fall in two-wheeler retail sales in the mini festive and wedding season in April-May 2021."

(The above story first appeared on LatestLY on Jul 04, 2021 08:31 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).