Indian shoppers plan to cut back

24 August 2012

NEW DELHI: Many consumers in India are likely to reduce their expenditure levels across a range of product categories, not least as a result of rising inflation in the country, a new study suggests.

Ipsos, the research firm, polled 400 people in India's biggest cities, and found four out of five planned to spend less on non-essential purchases going forward.

More specifically, 47% intended to cut back on big-ticket items, while 32% anticipated doing the same for eating out, a total reaching 31% when it came to branded apparel.

An additional 43% of the panel expected to postpone their holidays, and 47% predicted they would take public transport more often, the analysis added. 

In all, 90% of those surveyed reported that inflation, currently running at around 10%, has negatively impacted their household expenditure.

Many firms remain optimistic, however. Kishore Biyani, CEO of Future Group, India's largest retailer, observed that "the consumption trend has been strong owing to pent-up demand and value offers."

With FMCG companies recording 18% growth in the quarter to June, Adi Godrej, chairman of Godrej Group, a major player in this sector, concurred. "I feel consumer sentiment in India continues to be strong," he said.

Other executives suggested that lower-than-normal monsoon rains could hit sales, but believed shoppers should continue to spend, even if they traded down to cheaper products.

"The growth in FMCG this quarter could be a bit lower than last quarter though. But we don't have to shift to a yo-yo strategy to get short-term gains as we feel volatility is here to stay and we just have to be agile in responding to it," said Saugata Gupta, CEO of Marico, the consumer products group.

For its part, Cox & Kings, the travel operator, has registered "robust" bookings for the next few months. "We don't see any kind of slowdown as yet," said Karan Anand, its head of relationships and supplier management.

Carmakers were more gloomy, however, having seen sales growth rates slump from 25-30% between 2009 and 2011 to approximately 4% at present.

P Balendran, corporate vice-president at General Motors India, would thus like to see some government intervention, with "policy reform measures to boost the economy and bring in some sort of positive stimulus in sentiment."

Data sourced from Economic Times; additional content by Warc staff