All is not well with Indian consumers — their confidence in the economy is dwindling.
The Reserve Bank of India’s consumer confidence survey released on Wednesday reported a drop in consumer confidence in July as Indian households remained pessimistic about jobs and the general economic situation.
The current situation index dropped to 95.7 last month from 97.3 in May and 104.6 in March. The future expectations index (FEI) fell by four points to 124.8 in July.
“Consumers’ perceptions on the general economic situation and the employment scenario softened, while their assessment of their own incomes turned out to be less optimistic than in May 2019,” said RBI. It added that sentiment on overall spending remained optimistic in anticipation of further price rises. “Respondents perceived a rise in the price level and the majority expect prices to rise over the year ahead; this boosted sentiments on overall spending.”
RBI’s July survey was conducted in 13 cities, with 5,351 responses on households’ perceptions and expectations about the general economic situation, the employment scenario, the overall price situation and their own income and spending.
The survey suggested Indians are feeling less optimistic about spending.
The findings of the RBI survey come at a time when a slowdown in consumption is prompting households to either postpone big purchases or shop for better bargains in the market. As the economy continues to grow at a sluggish pace this is hurting both industry and households.
Sunita Chawla, a 37-year-old housewife in Lucknow, said she is waiting for Diwali to buy a smart refrigerator in the hope of better discounts. But Chawla may have to wait longer, as a modest hike in her husband’s salary this year is not enough to manage rising expenses. “Our festive season spending will be modest,” she said.
Ramanpreet Singh, a 42-year-old schoolteacher in Delhi, went grocery shopping last month to a big departmental store instead of her local kirana in search of better deals. “I got cash back, and offers such as ‘buy one get one free’ on handwash and packets of pasta,” said Singh, a mother of two, adding that she will continue shopping at places where she can save money.
Shoppers like Chawla and Singh are a cause of worry for makers of everything from cars to soaps, and washing machines.
“The drop in consumer confidence is very evident from the slowdown we are seeing in many sectors,” said Kamal Nandi, business head and executive vice-president of Godrej Appliances.
“With the news of jobs cuts, etc., we are seeing a conservative rather than a spending behaviour among consumers.”
In such a scenario, Nandi said, both new shoppers and those looking to upgrade their appliances postpone their decisions unless driven by factors such as weather. Some manufacturers have also cut down on inventory due to a slump in demand, he added.
Nandi said manufacturers are now looking forward to the festive season starting with Onam in September to scout for signs of revival.
Other retailers said shoppers have gone easy on impulse buying.
“Shoppers are more planned in their purchases, so-called impulse purchases have come down,” said Vasanth Kumar, managing director of Lifestyle International that runs a chain of departmental stores. Kumar added that the apparel retailer has also been witnessing a dip in footfall over the last few months prompted by new store openings and muted demand.
In response, retailers are not overstocking inventory and are holding on to any price hikes. Promotions inside stores are compensating for the drop in footfalls, he added.
“The rate cut could make a difference to middle income households,” said Nandi.
“With higher liquidity in the system, we expect banks to respond positively by transferring the benefit to borrowers through interest rate cut. This will lead to an increase in disposable income at the hands of borrowers and create a spike in consumption,” he added.