Mumbai: India remained at the top of Nielsen’s global consumer confidence index for the fourth quarter in a row, but whether confidence translates into consumption is still in doubt.
The country’s confidence score rose 1 point from the previous quarter and 9 points from a year ago to 130 in the three months ended March. India was followed by Indonesia (123) and the Philippines (115), according to the online survey conducted by Nielsen.
Although India retained its position at the top of the index, a substantial 44% of the respondents polled felt that the economy was still in the dumps, said the Nielsen Global Survey of Consumer Confidence and Spending Intentions.
Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism, respectively. An increase in consumer confidence index is a sign of brighter prospects for an economic recovery.
As the sequential increase in confidence in the March quarter is negligible, it still casts a cloud on India’s consumption story.
“We are seeing some initial signs of consumption recovery, but will have to wait for another quarter or two to see if this can be sustained. This will depend on factors like timely monsoons and inflation," said Piyush Mathur, president, Nielsen India region, in a phone interview.
This is in line with what consumer product makers such as Hindustan Unilever Ltd (HUL), Godrej Consumer Products Ltd and Marico Ltd said when they announced their March quarter earnings.
“There is no clear visible trend emerging at present. It is a bit too early to predict... Maybe we will have to wait for a quarter or two," said Sanjiv Mehta, chief executive officer and managing director at HUL, the maker of Lux soaps, Surf detergents and Kissan jams, at the company’s earnings conference on 8 May.
Delayed and deficient monsoon rains last year, followed by unseasonal showers that damaged winter crops in the past two months, have hurt rural incomes and consumption despite inflation slowing. Consumer Price Index-based retail inflation eased to 4.87% in April, a four-month low.
“The fall in inflation is expected to have an impact on disposable income over time, but it will take time for the sectors to be restored to perceptible and sustainable growth," said Mathur.
Growth in infrastructure, engineering and other industrial sectors is yet to gather pace. India’s eight core sectors shrank for the first time in 17 months by 0.1% in March, compared with a 1.4% expansion in February due to a dip in production of steel, natural gas and refinery products, according to official data.
The Nielsen survey, established in 2005, measures perceptions of local job prospects, personal finances and immediate spending intentions among over 30,000 respondents with Internet access in 60 countries.
Over four in five urban Indian respondents (nearly 83%) polled in the survey, conducted between 23 February and 23 March, exuded the highest level of optimism globally on job prospects in the next 12 months; the figure was 74% in the same quarter last year. India was followed by Indonesia (74%) and the Philippines (73%).
According to the survey, discretionary spending and savings of over three in five (65%) online respondents polled indicated this is a good time to buy things they want and need, compared with 54% in the year-ago period.
When it comes to investing spare cash, 64% indicated it is a good time to put it into savings.
The purchase intent for new clothes by urban online respondents was 44% in the March quarter, the same as in the previous quarter. Also, 79% respondents changed their spending habits to save on expenses, the survey showed.
The top three cost-cutting avenues in the March quarter were savings on gas and electricity (49%), spending less on new clothes (45%), and cutting down on holidays and short breaks (35%).
The state of personal finances for 80% of urban Indian respondents was good or excellent in the first quarter of 2015, 4 percentage points up from 76% a year ago. The top concerns remained job security (22%), sustaining a work-life balance (11%), and followed by state of the economy (9%). Parents’ welfare and happiness was the second biggest concern for 12% of the respondents.