Indian consumers remain confident despite economic slowdown: Nielsen

Country tops consumer confidence index in April-June; economists say more pain ahead

Notwithstanding the slowdown, Indian consumers seem confident about the future, the data from market research agency Nielsen shows. India topped the global consumer confidence index in April-June at 138, the highest in six quarters, coming at a time when domestic economic growth has fallen sharply.

The Nielsen findings are in contrast to the Reserve Bank of India’s (RBI’s) consumer confidence index and gross domestic product growth numbers released by the government last week, which showed that India’s economy had slowed to 5 per cent — a steady decline over a year. What’s more worrying is that growth in private consumption — the key engine of growth — fell sharply to 3.1 per cent.

The RBI’s consumer confidence index for July has already alluded to further pain, saying it fell to 95.7 in the month under review versus 97.3 seen in May and 104.6 in March. The central bank also said that the future expectations index fell by 4 points to 124.8 in July.

Yet, Nielsen says it remains optimistic about the months ahead. “Growth of 10 per cent in terms of value for the domestic fast-moving consumer goods (FMCG) market is still among the strongest in the world. There are not many markets where we are seeing this kind of growth rate despite it being down versus the previous quarters for the domestic FMCG industry,” says Patrick Dodd, global president and chief commercial officer, Nielsen. 

“This is a strong indicator to me of the FMCG consumption here and the prospects for the future,” says Dodd. 

Meanwhile, analysts and economists caution the full impact of the slowdown will be felt in July-September just before the festive season of Dussehra-Diwali kicks in. 

“Whether the slowdown is short-lived or long-lived will become clear in a quarter or two,” says Soumya Kanti Ghosh, group chief economic advisor, State Bank of India.

Companies are measured in their response to consumer confidence growing, saying they see a revival in two-three quarters from now. “There will be interventions by the government, now that the RBI has released surplus funds to stimulate the economy,” says Mohit Malhotra, chief executive officer, Dabur India. “I don’t think the slowdown will be structurally long term. Growth will be back in a couple of quarters,” says Malhotra. 

Kamal Nandi, business head and executive vice-president, Godrej Appliances, says festive sentiment should improve, with the government announcing its first round of measures recently to revive the economy.

“The first set (of measures) was announced a few weeks ago, including an injection of liquidity into the economy through a recapitalisation of public sector banks. The finance minister has said that a few more steps will be taken in the future. I think it will help improve sentiment during the festive season,” says Nandi. Typically, says Madan Sabnavis, chief economist, CARE Ratings, the festive season is when Indians step out to make key purchases coinciding also with the post-harvest period when rural incomes improve.