Indian consumers cut major purchases

02 June 2009

NEW DELHI: A majority of Indian consumers are concerned about the condition of the country's economy, and also plan to cut back on making major purchases in the economic downturn, although spending levels in a number of categories, including FMCG and telecoms, should continue to rise, IMRB has found.

The research firm polled over 2,400 households in India, and reported that 55% of participants regarded the overall economic climate as negative, while just over half displayed a similar lack of confidence in the employment market.

However, 78% of respondents agreed that their personal financial situation had either remained the same or actually improved despite the onset of the recession, with this outlook being more pronounced in urban centres than rural regions.

Among the areas in which consumers are looking to cut back are "big ticket" purchases – such as in the real estate or automotive categories – with most arguing they would be "unwilling" to make such purchases either now or in the future.

By contrast, the typical contributor had actually increased their outlay on what they considered to be "essential items", which are generally said to include products in the FMCG, apparel and telecoms sectors.

The company also conducted a survey of chief executive officers, chief financial officers and chief marketing officers from 80 of India's biggest companies, across 15 different markets.

Over 70% of this group argued that the current slowdown would be short-lived, and predicted that the situation would improve by the end of the financial year in 2010.

With regard to their overall financial positions, companies operating in the FMCG, IT, banking and education sectors had been least affected by the decreasing pace of economic growth.

The entertainment sector had seen the most pronounced slide in revenues and profit margins since the start of the crisis, while prices had increased and accessing new funds had also become more difficult.

Data sourced from Economic Times; additional content by WARC staff