Mumbai/New Delhi: India lost its top ranking on Nielsen’s consumer confidence rankings for the first time in nine quarters, dislodged by Indonesia, as rising prices, slowing growth and a weak rupee took their toll.
Indonesia’s consumer confidence index rose 2 points to 120, while that of India fell 4 points to 119 in the latest Nielsen Global Online Survey that covered 56 countries in the April-June period.
“The drop from the top position for India, after nine quarters, indicates a growing anxiousness amongst Indian consumers today, in relation to the job prospects and spending habits,” said Piyush Mathur, president, Nielsen India.
With rainfall in the June-September monsoon so far deficient and a central bank focused on reining in inflation, confidence isn’t likely to revive unless economic indicators change dramatically.
India has been toppled from its top position in Nielsen’s consumer confidence survey for the first time in more than two years. Nielsen India’s Piyush Mathur talks about some key findings.
Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively. A high measure bodes well for retailers and manufacturers as it shows the propensity of consumers to spend.
The fall in India was sharper than the global confidence level decline, which was down two points in the June quarter to 99, driven by global uncertainties and the euro crisis.
Nielsen’s survey reveals that job security (21%) and the state of the economy (12%) continue to be the biggest concerns for Indian respondents. The level of optimism regarding job prospects has fallen to 77% from 84% in the March quarter and by 9 percentage points from the same period last year.
Globally, Indian online consumers, followed by online consumers in the Philippines (71%) and Malaysia (70%), are the most optimistic about their job prospects in the next 12 months. Wellbeing of parents (9%) and increasing fuel prices (8%) are two other areas of worry for them.
Further, over half (53%) of the online respondents said they believe India was going through an economic recession in the June quarter. “Rising inflation and fuel prices, which are a direct hit on the consumer’s wallet, combined with a comparatively low GDP growth and devaluation of the rupee, have taken a toll on consumer confidence,” said Mathur.
Gaurav Gupta, senior director, Deloitte Touche Tohmatsu India Pvt. Ltd, said, “There is a perception in the market about the Indian economy not doing too well and that could further go down.” The impact of this will be felt on discretionary spends which include travel, clothes, cars, consumer durables and eating out, he said.
For instance, the Rs 52,000 crore consumer durables category (TV sets, refrigerators, washing machines and the like) has seen a sharp drop—from 14.2% in 2010-11 to 2.5% in the fiscal ended March, according to data compiled by Centre for Monitoring Indian Economy (CMIE) Pvt. Ltd, an independent economic think tank headquartered in Mumbai, and the Federation of Indian Chambers of Commerce and Industry (Ficci).
“Negative global influences, high inflation along with high taxation of close to 24-28% have caused the entertainment spends of consumers to decline,” said Kamlesh Barot, president, Federation of Hotel and Restaurant Associations of India.
“Consumers are sensitive to inflation and increasing prices,” agreed Amit Jatia, vice- chairman, Hardcastle Restaurants Pvt. Ltd, the franchisee for McDonalds in the west and south, who has noticed a drop in footfalls at the value restaurant chain.
A drop in discretionary spends and the subsequent build-up of inventory has also caused retailers such as India’s largest listed one by revenue, Pantaloon Retail (India) Ltd, Shoppers Stop Ltd and brands such as Zara, FcUK, Vero Moda, Mango and Aldo to start their end of season sales in the first week of July rather than the more traditional mid-August.
“What we are seeing is more focus on value for money products and offers coming out at this point such as more options for financing of goods,” said Jessie Paul, chief executive officer, Paul Writer, a marketing advisory firm based out of Bangalore.
However, spending on non-discretionary items or essentials such as groceries remain robust. “In our stores which have been open for longer, we have grown at 20% in the year-to-date,” said Vineet Kapila, president for the RPG Group-owned Spencer’s Retail Ltd. Food and groceries account for close to 80% of the retailer’s overall revenue.
However, with below-average monsoons so far this year, there are concerns that the rural consumption which accounts for 35-40% of the Rs 1.6 trillion consumer packaged goods market, could see some impact since a good monsoon puts more money in the hands of the farmers.
“If this trend continues, (rains getting delayed), the festive season might not look too good either for consumer companies,” said Gupta of Deloitte.
Nielsen’s Mathur did offer a silver lining, though. He said: “Despite the slowdown, though, the nominal growth rates are still the envy of the developing world, given the size and scale of the market.”
The survey was conducted 4-21 May and polled more than 28,000 consumers in the Asia-Pacific, Europe, Latin America, the Middle East, Africa and North America. In India, the sample size for the survey was 500 consumers.
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