How long can one escape the clutches of recession? While the world went into an economic slowdown towards the end of 2008, Indians have just started losing confidence in their economy. In recent times, consumers have experienced an onslaught of bad news in the form of job cuts, company profit plummeting, bankruptcies and foreclosures, which has led to a reduction in consumer confidence and people’s spending power. Consumer confidence in India has finally started to reflect the sentiments of consumers in the rest of the world.
India witnessed a 15 point drop in Nielsen’s Consumer Confidence Index and ranked third with 99 points, behind Indonesia which topped the confidence rankings with 104 points and Denmark which came second with 102 points. India had ranked first in the Nielsen Consumer Confidence ranking in the last round of the survey in October last year.
The latest Nielsen Global Consumer Confidence survey saw consumer confidence across countries take a beating, falling seven index points from 84 to 77. Consumer confidence fell in 49 out of the 50 countries surveyed; Taiwan was the only country to buck the global trend, edging up three points from 60 to 63.
Despite consumer confidence taking a dip in India, it is also true that most Indian respondents are quite optimistic about the situation changing in the next 12 months. Fifty-six per cent of Indians think the country will be out of the economic recession in the next 12 months — the second highest percentage for a country globally, behind Vietnam with 60 per cent.
Consumer confidence in India may have fallen but it’s not yet vanquished. Compared to others in the Nielsen survey, India remains an optimistic country. Forty-seven per cent of Indians have an optimistic perception about local job prospects in the next 12 months, with 6 per cent considering them to be “excellent” and 41 per cent considering them “good”.
Indians are the second most optimistic behind Indonesia (54 per cent), when it comes to job prospects over the next 12 months. The growth prospects in India are better than most other countries at the moment.
The optimistic outlook about job prospects also trickles down to the state of personal finances of Indians. Sixty-two per cent of Indian respondents consider the state of their personal finances to be either “excellent” (6 per cent) or “good” (56 per cent) for the next 12 months — ranking Indians as the fifth most optimistic globally when it comes to the state of their personal finances.
However, consumers are not too confident about making purchases at the moment. Only 3 per cent consider the current environment to be an “excellent” time to buy the things that they want or need, while a further 37 per cent consider it a “good” time to make those purchases.
Spending spare cash
For Indians today, cash is king. People have become a lot more concerned about their future and their attitude towards money reflects that. They are diverting more cash into items that will give them financial security on a rainy day.
With 66 per cent Indian respondents voting for it, “putting into savings” remains the most important thing to do with spare cash after covering essential living expenses — ranking Indians as the sixth biggest savers globally. Compared to the last round of the Nielsen survey, the percentage of Indians putting their spare cash into savings has increased from 58 to 66 per cent, reflecting the more conservative mindset of Indians currently.
Paying off debts/credit cards/loans follows as the second most popular thing to do with spare cash, garnering 38 per cent of Indians’ votes, representing a 4 percentage points increase compared to the last round of the survey.
Investing in shares of stock or mutual funds ranked third for one-third of respondents, and witnessed a drop of 9 percentage points in comparison to the previous round of the survey.
New technology products (27 per cent), new clothes (27 per cent), holidays and vacations (25 per cent), home improvements/decorating (22 per cent) are other areas where Indians spend their spare cash, albeit all have experienced a decline in the last six months.
Apart from saving for a rainy day, Indians are also tucking away spare cash for a comfortable future. The percentage of Indian respondents putting their spare cash into a retirement fund has increased from 20 to 22 per cent — the fifth highest percentage globally and quite high relative to the global and regional average of 10 per cent who put spare cash into retirement funds.
Indians have become more conscious about the way they handle money. The uncertain economic future is preventing Indians from taking risks on the stock market. It is also acting as a push for Indians to get their liabilities, in terms of debts and loans, behind them as fast as possible. Indians are saving as much as they can at the moment to ensure they have a nest egg behind them in case they need to dig in to it at a later date.
Major concerns
Fears of unemployment and job security have reached new heights, with global redundancies affecting every industry. But under the current scenario, Indians are more worried about their own jobs than they are about what is happening about the overall economy elsewhere.
For more than two in five Indians (44 per cent), job security tops the list of major concerns in the next six months — ninth highest percentage globally. Job security has seen a sharp increase — more than doubling, in fact — compared to the previous round of the Nielsen survey where it was a major concern for only 19 per cent of Indian respondents. Worldwide, the economy remains the number one concern for the world’s consumers, but in India it is the second major concern with 38 per cent Indian respondents voting for it.
Though terrorism topped the global charts in the October 2008 survey, this time round it has dropped a little in importance for Indians. India ranks number two with 16 per cent votes for its concern over terrorism, the number one spot taken over by Pakistan with 18 per cent votes. It is interesting to note that globally only 3 per cent of respondents are concerned about terrorism.
Vatsala Pant, Associate director, consumer research, The Nielsen Company
| How it was done
Nielsen Global Consumer Confidence Index conducted by The Nielsen Company covers Internet users around the world every six months. The survey has been gaining traction since it was launched as an Asia-Pacific initiative about five years ago, before “going global” at the end of 2004. The latest survey, conducted from March 19 to April 2, 2009 polled 25,140 internet users in 50 markets from Europe, Asia-Pacific, North America and West Asia. |
About 500 people were interviewed in each country. Three questions are used to calculate the consumer confidence index. They relate to job prospects in the next 12 months; the state of the respondent’s personal finances in the next 12 months; and, based on the cost of things and the respondent’s personal finances, whether or not it is a good time to buy things he wants and needs.
The scale of answers to all three questions are: Excellent, Good, Not so good and Bad. To calculate the index, each response was given values: Excellent (200), Good (133.3), Not so good (66.6) and Bad (0). Using these values, the average of the three questions was taken for each respondent. The index for each country was calculated by taking the index average for each respondent in that country. An index value of 100 corresponds to an average halfway between “Good” and “Not so good”.
