Consumer confidence

of July 13.

Conducted in 13 countries in June this year, it shows that Indian consumer confidence ranks the highest in the region, higher than even prosperous economies such as China, South Korea, Thailand or Singapore. The survey covered 9,485 consumers with Internet access.

Indian consumers were the most confident among respondents in the region in their perceptions about their country's economic performance over the past six months "" that is, soon after the previous government's pre-election liberalisation measures and the interim Budget were announced.

This holds true for perceptions of economic performance for the next 12 months also, but the current government would do well to note that there is a small dip of four percentage points over the second half of 2003 in this respect.

The upshot of this relatively high level of confidence can be good news for the economy because a higher percentage of consumers (94 per cent) said they were willing to spend their discretionary income compared to the last survey (90 per cent).

Much of this increased spending, significantly, will go towards home improvement and decoration and new clothes, no doubt with an eye on the upcoming festival season a few months down the line.

But it is on the savings side that the government would do well to take note, since there are potent policy signals emanating from the findings. Much more than spending, a substantially higher percentage of Indian consumers (96 per cent) say they also intend to save a portion of their discretionary income compared to the first half (H1) of 2003 (88 per cent).

The more significant subtext here is that more Indians are willing to put their money in stocks and bonds (52 per cent compared to 48 per cent in H1 2003). This, again, is a regional high and is a reflection of both confidence in the economy and buoyant conditions in the stockmarkets before the election results were out.

Compare this, for instance, with China where only 33 per cent of the respondents said they intended to invest in the domestic secondary market for equities. Perhaps this finding could provide an impetus to the finance ministry to urgently modify the more retrograde elements of the securities transaction tax.

Although the big picture appears optimistic, the old fears remain. Like the last survey, Indian consumers continue to cite job security and political stability as causes for concern.

About a third of the respondents were worried about keeping their jobs "" a pointer to the possible dangers of corporate India's relentless productivity drive and the absence of worthwhile safety nets for the victims of restructuring and downsizing.

A quarter also cited political uncertainty as a cause for concern over terrorism, crime and the economy. Surely, there's a lesson in this somewhere for the UPA government.