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Nielsen said pre-planned expenses for the September quarter are being reallocated as consumers try to save and ensure liquidity for future spends. (Photo: Bloomberg)
Nielsen said pre-planned expenses for the September quarter are being reallocated as consumers try to save and ensure liquidity for future spends. (Photo: Bloomberg)

Covid disrupts household budget as costs skyrocket

Nearly 60% of the respondents to a survey said covid has negatively impacted their household incomes

The covid-19 pandemic has impacted household incomes, forcing families to cut investments and shift funds toward household expenses and savings, market researcher Nielsen said on Friday.

Nielsen surveyed 1,190 peoplein 12 cities in April for their financial health across low, middle and high income households.

Nearly 60% of the respondents said the pandemic has negatively impacted their household incomes, affecting the way in which they are now allocating monthly incomes across categories. Nielsen said pre-planned expenses for the September quarter are being reallocated as consumers try to save and ensure liquidity for future spends.

This is an outcome of the financial uncertainty wrought by covid-19 that has led to a protracted lockdown and layoffs across industries, and stymied economic activity. “Majority of households’ income has been negatively impacted, with contribution of regular expenses going up, and budgets being managed by curtailing investments," Nielsen said.

Nielsen’s estimates come as the Reserve Bank of India (RBI) on Friday cut the repo rate by 40 basis points, a step that will help further lower lending rates. RBI also moved to extend the current three-month moratorium on loan repayments by another three months.

RBI governor Shaktikanta Das said covid-19 has dealt a big blow to private consumption, which makes up around 60% of domestic demand.

Those surveyed in April said they had to change their expense allocation between investments, savings (cash at bank or hand), loan and credit card dues, and their share of monthly household expenses.

For instance, across low to middle and high income households, the respondents lowered their monthly income allocation toward investments from 20% pre-covid to 16% during covid-19.

Low income households, as per Nielsen, are those with a monthly household income of up to 50,000; while middle income households are those between 50,001 and 1 lakh. Nielsen describes high income households as those with a monthly income of 100,000 and above. “So the regular expenses have gone up across low-to-mid income households while high income households have not seen any impact," said Sameer Shukla, west market leader, South Asia, Nielsen Global Connect.

The respondents said they plan to hold on to some planned large expenses such as travel and buying appliances. Only 28% said they feel confident enough to go ahead with their planned expenses, while 24% said they will suspend their plans for a full year.

Over 20% said they will hold on to their funds while an equal number said they will invest their money. “Consumers buying furniture and durables have more inclination to go ahead with the plan," Nielsen said.

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