Home/ Economy / Inflation hurts household spends on daily goods: Survey

New Delhi: Inflation continued to hurt household budgets in the year gone by as price hikes in categories such as milk, wheat flour, rice and even fuel compounded the slowdown in demand for discretionary items while prompting consumers to switch to cheaper packets of essential goods such as washing bars and soaps, according to Kantar’s FMCG Pulse reported released this week.

Kantar foresees caution continuing in spending patterns in 2023 as consumers struggle with their budgets. “We will very likely turn consumption positive towards the second half of the year, provided the macro conditions do not throw us a curve-ball," they said.

To study the impact of inflation on households, Kantar did two rounds of survey. First in June, followed by another in November. The study was done on a sample size of about 6,000 households.

“Consumers perceive that there has been increase in price across majority of essential categories during the second half of 2022. More than two-fifth of consumers feels prices have increased across various categories like fuel, electricity and staples such as milk, wheat flour, and rice. In fact, this perception is even higher among urban affluent households with almost 80% of consumers feeling that prices have gone up. This is probably because they are involved in purchase of many more categories. And consequently, Indian consumers are not spending too much on discretionary categories,“ Kantar said in a report that looked at overall consumption of fast moving consumer goods in the country in 2022.

In fact, during both rounds of the survey, Kantar noticed that the share of spends on groceries and dairy moved up as consumers faced higher prices of daily goods. It increased during the September-November period as spends on these categories grew by 5%, and 6%, respectively. “Despite of festivities we don’t see much increase in share of discretionary sectors like fashion and consumer durables, which also indicates the cautious state of the market currently," they said.

To be sure, inflation in the cereals category in India touched 16% in January; inflation in food and beverages also increased during the month with prices of milk, eggs and meat moving up.

An average Indian spends about 38,000 on household expenses within a quarter. However, this varies across different population strata and level of affluence. A household in metro city spends about 1.6 times more than a rural household. An affluent household spends 1.4 times more than an average household. “However, we do see some impact of inflation on overall spending. The average spends of 42,200 in the April-June period declined by 10% during the September-November period despite festivities," the report said.

Over 75% of consumers surveyed by Kantar said they are struggling to manage their budget, and about 40% feel the situation is going to become worse in the future. The stress is even more pronounced in metros and among less affluent households.

This means that consumers are likely to continue spending on essential categories while ditching non-essential spends for some time to come.

“Despite of perceived hike in price, consumers are not planning to compromise on essential categories like education, medicine, staple food, groceries and daily essentials like toothpaste, shampoo and soaps. Consumers will continue to spend on these categories and are likely to manage their budget by moving to cheaper brands within household categories like washing powders, bar soaps etc. And they may consume less of ancillary staples like besan, poha, rava, Spices," the report said.

Meanwhile, discretionary products like convenience goods run the risk of getting dropped out. A fifth of consumers surveyed by Kantar said they are likely to stop spending on categories like packaged juices, soups, ketchup and on entertainment and eating out if prices further go up.

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Updated: 28 Mar 2023, 02:32 PM IST
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