As the downturn tightens its grip, consumers shy away from spending. Consumer confidence takes a beating in India and the world over.
In the October 2008 round of the Nielsen Global Consumer Confidence Survey, things still looked upbeat. The financial markets were facing their worst crunch ever. Still, India was way ahead of the pack as the nation of most confident consumers on earth. Its score of 114 on the Nielsen Consumer Confidence Index was several laps ahead of the global average of 84.
The latest edition of the Nielsen survey shows that the confidence of the Indian consumer has been seriously dented, notwithstanding the government’s fiscal stimulus and stray signs of economic recovery. India has ceded the top spot to Indonesia. It is now, in fact, ranked third — Denmark has come second.
Worse still, it has now become a part of the double-digit consumer confidence crowd. At 99, 15 points lesser than last time, it is the lowest India has scored in the last six rounds of the survey. (The fall this time round has been steeper; in the previous round, it had fallen eight points from 122.) The elite club of triple-digit consumer confidence countries now has only two members — Indonesia (104) and Denmark (102).
Gloom and hope
Meanwhile, global consumer confidence has fallen seven points to 77. (As a result, the gap between India’s score and the global average is now down to 22 from 30 in the last round.) No fewer than 49 of the 50 countries surveyed have registered a fall in consumer confidence. Taiwan is the only country to go against the grain — its consumer confidence is up three notches to 63.
To add to the gloom, about 77 per cent of consumers surveyed by Nielsen globally think their economy is in recession, up from 63 per cent in October last year.
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In India, only 28 per cent of the respondents think their economy is not in recession. (Technically, India is facing a slowdown in growth and not a recession where there is a decline in the gross domestic product.) In other words, as many as 72 per cent could feel India is in recession. (In contrast, 65 per cent of Chinese polled in the survey feel their economy is not in recession.) Of those who believe the country is in recession, more than half (56 per cent) think it will come out of recession in the next 12 months.
Maruti Suzuki Chairman R C Bhargava had recently said that his company, which is the country’s largest producer of cars, had seen record production in March and things looked good for the next three months. Pawan Munjal, the managing director and CEO of Hero Honda, India’s largest two-wheeler company, says sales are looking good till the next festival season which will end with Diwali in North India some time in November. “We should grow at a healthy pace till then,” says he.
Much of this growth of course is going to come from small towns and villages — markets that haven’t borne the brunt of the economic slowdown. Good rains, the farm loan waiver and the rural welfare schemes have all added to the purchasing power there. Still, it has failed to lift the mood of the Indian consumer, the Nielsen survey shows.
On the jobs front, India is the second most optimistic country in the world after Indonesia. Six per cent Indians believe this is an excellent time for jobs, while as many as 41 per cent feel it is a good time for jobs. This is not surprising since India has not seen the kind of large-scale layoffs that have happened in the West. “If you are an employee, Asia is the place to be. And in Asia, India is the place to be,” says Mercer Asia Pacific Head Peter Promnitz. Conservative Indian companies are still handing out conservative annual increments. Consequently, 62 per cent of the Indians surveyed are optimistic about their personal finances over the next 12 months. Little surprise then, 40 per cent Indians say this is a good time to buy the things they want or need.
“I would say that the consumer has certainly become cautious in his spending. Impulse purchase may have come down. However, need-based purchase still continues, which has contributed to growth in the sector,” explains Samsung’s Zutshi.
Savings spree
But that hardly makes Indian consumers big spenders of money, according to the Nielsen survey, for a majority of them now prefer to put their spare cash into savings. As many as 66 per cent of those polled say they will save, up from 58 per cent in the last Nielsen survey. Thirty-three per cent say they will also invest in shares and mutual funds, down from 42 per cent last time. Twenty-two per cent will also put their money into retirement funds, up from 20 per cent in the previous survey. The import is significant — people are nervous about the stock markets and feel retirement planning is a better way to secure the future.
Indians, therefore, are tightfisted when it comes to buying new clothes, going on holidays, as well as spending on out-of-home entertainment and home improvement. It’s safe to assume that Indian consumers are cautiously optimistic.
Beating India in the savings department are Singapore and Hong Kong at 75 per cent and 74 per cent, respectively. In fact, nearly half the global respondents (48 per cent) say they will now put spare money into their savings kitty. This is two percentage points more than the last round of the survey. Paying off debts too has risen two percentage points to 32 per cent. The downturn, it appears, has had a serious impact on lifestyle in many parts of the world. No doubt, extravagance has stalled and the population of individuals with no spare cash has risen. Only retirement fund investments remain flat at 10 per cent.
Things are different in China, Thailand and Singapore as citizens of these countries still burn their spare cash on holidays and vacations. Retail therapy continues to pay off in Russia, Brazil and China as more than 35 per cent of respondents there say they will spend their money on new clothes.
What worries?
When it comes to concerns, India has quite a few, including job security and the economy. Job security is the biggest concern for big savers in Singapore, Hong Kong, UAE, Vietnam, Spain and Hungary. The global concern over job security is up from 9 per cent to 22 per cent.
India is the second-most worried nation when it comes to terrorism. Sixteen per cent Indians say it is their top-most concern. The November terror attacks on Mumbai and the rise of the Taliban in neighbouring Pakistan have shaken them.
Overall, the biggest global concern is the economy, which is up from 20 points to 23 points. Another leading concern is increasing fuel prices, particularly for the US — the world’s largest fuel consumer. France, Russia and New Zealand are most concerned about increasing food prices. Footloose and fancy-free are The Netherlands, Norway and Denmark with no concerns at all.