Revenge-spending Indians drank and dined after being cooped up in covid years

Demand for alcoholic beverages jumped significantly in FY23 following a slump in the year prior.
Demand for alcoholic beverages jumped significantly in FY23 following a slump in the year prior.

Summary

Latest government data show households spent more on alcohol and hotels than on clothing, packaged consumer goods and routine household maintenance in FY23

NEW DELHI : Indians spent liberally on dining at hotels and restaurants and on alcohol in 2022-23 while going easy on clothing, food and non-alcoholic beverages, clearly marking out their preferences emerging from two years of pandemic lockdowns.

Growth in private final consumption expenditure on food and non-alcoholic beverages slowed to 6.2% in FY23 from 6.6% in the year before, show the government’s PFCE data released on Thursday.

Private final consumption expenditure is defined as the expenditure incurred by households on final consumption of goods and services, and is reflective of the broader household demand in the country.

The data reveal divergence in household consumption trends that companies have been highlighting in recent quarters—wherein consumers have been prioritizing spending on experiences over products. Besides, high inflation has crimped demand for mass-market products.

“The consumption data released by the government corroborates the sluggishness of the (fast-moving consumer goods) sector in comparison to the GDP growth," said K. Ramakrishnan, managing director, south Asia, Kantar Worldpanel.

“Expenditure on components such as education, health and even restaurants and recreation has far outpaced FMCG growth, indicating that the private consumption expenditure is going towards components other than foods, beverages and household related categories," he said.

The PFCE-GDP ratio at current prices slipped to 60.9% in FY23 from 61.0% in the year before, and is expected to drop further to 60.3% in the ongoing financial year.

Demand for alcoholic beverages jumped significantly in FY23 following a slump in the previous fiscal year. Household consumption of alcoholic beverages, tobacco and narcotics grew 6% in FY23, against a 1.4% decline in the year prior. 

Private expenditure  on restaurants and hotels soared 55.1% year-on-year on an already high base of 37%. The sector reported a significant decline in the aftermath of covid and has seen a resurgence since. 

Demand for clothing and footwear was down 8.9%—the only category to report a decline in private consumption during the year, albeit on a high base of the previous year.

Overall, private final consumption expenditure at current prices is estimated at 164.23 lakh crore for FY23 as against 143.83 lakh crore in FY22, according to the government data. 

Growth in private consumption of furnishings, household equipment and routine household maintenance slowed to 9.3% in FY23 after reporting a 21.3% jump in the fiscal year prior.

Clothing sales have been declining due to increased competition from other categories, with a shift towards casual wear and shrinking of total purchasing power, said Rahul Mehta, chief mentor at the Clothing Manufacturers Association of India.  

The data corroborates with the trend seen in the apparel industry, he said.

“Apparel saw a huge upswing in 2022 after two years of the pandemic and as a result consumers spent a lot on the category; wardrobes were upgraded. Now clothing is no longer a status symbol—there are more categories such as mobile phones and holidays where consumers are spending," Mehta said. 

As for the liquor sector, a senior industry executive, speaking on condition of anonymity, said demand for spirits has been sluggish in the previous nine months, with sales growing at a mere 2-3%. 

The slowdown is more pronounced in mass-market brands where consumers are seen cutting back on consumption of branded liquor, while premiumization continues to drive consumption of alcoholic beverages as urban consumers buy more pricey liquor. 

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