New Delhi: For the second quarter in a row, Indian citizens have emerged as the most bullish in a global survey of consumer confidence, reflecting hope that the economy is headed for better times, but popular euphoria over the change of government in May is seemingly starting to fade.
With a score of 126, India topped market research firm Nielsen’s Consumer Confidence Index for three months to 30 September, which covered 30,000 respondents across 60 markets in the Asia-Pacific, Latin America, Europe, Middle-East and North America. India’s score dropped from 128 in the preceding quarter.
“In India, overall, the confidence index continues to hold near its previous levels with the euphoria around the recently elected government settling down,” said Piyush Mathur, president, India, for Nielsen.
For consumers, the top concern continued to be job security, the Nielsen survey said. In the study conducted between 13 August and 5 September, four in five (82%) urban Indians were the most optimistic about job prospects in the next 12 months, followed by counterparts in Indonesia (80%) and China (74%).
Seventy–six percent of respondents in urban India indicated the state of their personal finances was good or excellent. Yet, willingness to purchase saw a marginal decline. Nearly three in five (59%) online respondents polled said it was a good time to buy things they wanted—a 1 percentage point drop from the previous quarter.
The survey’s findings seem to bear out anecdotal evidence that consumer confidence hasn’t led to higher retail spending in Asia’s third largest economy, which grew 5.7% in the quarter ended 30 June, the fastest pace in two-and-half years, after two consecutive years of sub-5% expansion.
The emergence of a stable government led by the Bharatiya Janata Party (BJP) in the April-May general election, on the promise of reviving economic growth and creating more jobs, had spurred optimism that consumers who had tightened household budgets would start spending more. Belying those expectations, consumer spending in the festive season that peaked with Diwali on 23 October was subdued, retailers and analysts said. “While there is bullishness and noise in the market, people are still not confident about spending as they were, say, two years ago,” said Rachna Nath, executive director at the consulting firm PricewaterhouseCoopers India.
According to the Nielsen survey, three in five (61%) urban respondents in India said they would put money into savings. People are also saving money by spending less on gas and electricity, new clothes, telephone bills and vacations, the report said.
Nielsen’s findings came two days after India’s largest consumer goods maker Hindustan Unilever Ltd reported an 8.1% increase in net profit for the three months ended 30 September, marginally below analyst expectations.
“Have we seen a significant uplift in the quarter gone by? The answer is no,” said HUL’s chief executive Sanjiv Mehta after the earnings announcement. “Has it stabilized, I would say so. It hasn’t deteriorated beyond the kind of levels we saw in the previous quarter. But we still haven’t seen an uplift in the demand.”
The Indian unit of Nestle SA, the world’s largest food and beverage company by revenue, posted a 9.2% jump in quarterly profit on Tuesday said that it too was awaiting an uptick in consumer demand.
“Though the sales dynamic is better, we remain cautious as we are yet to feel the buoyancy from the external environment,” said Etienne Benet, managing director of Nestle India, in a statement.
“Consumers now have many more options to buy cheaper, discounted goods...they no longer want to buy full-priced merchandise. The increased consumer confidence is not translating into increased spends for us,” he said.
To be sure, not everyone is complaining. British retailer Marks and Spencer Reliance India Pvt. Ltd, for instance, reports consistent growth. “We do see a positive consumer sentiment and are confident on the prospects of the Indian market,” said managing director Venu Nair.
Nilesh Gupta, managing director at Vijay Sales, an electronics retail chain, said the company’s sales grew 20% in the festival season over the year-ago period. “The increase was on account of us putting out better deals...50-60% of our sales came from the advertised products, which were on discounts,” he said.
Nielsen’s Mathur said overall consumer spending was likely higher than in the previous quarters because of gifting and entertaining during the festival season.
“Also, e-commerce has been gaining traction among urban affluent shoppers with online retailers spurring demand with discounts. The actual impact of this on consumer spending might be more evident towards the end of the year,” he said.
Sapna Agarwal in Mumbai and Shrutika Verma in Delhi contributed to this story.