Experts discuss Consumer Confidence Index outlook for 2010

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The CNBC-TV18 Boston Analytics Consumer Confidence Index (CCI) polled 10,000 respondents across 15 cities. This is done across most economic strata-points. All the demographics have been taken into consideration. This index came into being in January 2008.

In an interview with CNBC-TV18, Kimberlee Luce, Vice President of Boston Analytics and Munish R Varma, Managing Director and Head of Global Markets (India), discuss their CCI outlook for 2010.

Here is a verbatim transcript of an exclusive interview with Kimberlee Luce and Munish R Varma on CNBC-TV18. Also watch the accompanying video.

Q: We have seen a bit of a bottoming out and uptick for the past couple of months. There were hopes that now finally the sentiment would be following what you would be seeing in the economy. What you are seeing in the stock market? We have a surprise drop of nearly 5% in December. What are the key internals telling you?

Luce: We were caught a little bit by surprise by last month seeing this 4.9% drop in the Consumer Confidence Index. We had seen a bottoming out and a couple of upticks in the last few months. Previous to that we had seen a slowing or a decline. There are a couple of factors that are contributing to this.

There are some aspects which are positive to the Consumer Confidence Index. We saw an increase in optimism amongst Indian consumers and their perceptions in the overall nation economy as well as their own personal financial conditions. However, that was outweighed by a concern over a number of factors and inflation being one of them, rise in interest rates, some weakness and some aspects in consumer spending and also employment outlook. These are the four key drivers they have led to a surprising decrease in the consumer confidence.

Q: Another interesting factor's from this index was the clear dichotomy between tier two and three. You are seeing a bit of resurgence factor in metros like Mumbai and Delhi. Inflation was touted as a key concern in the index and people's grocery bills were getting higher. They may spend less on discretionary. What is your sense on this entire dichotomy?

Varma: This is explainable to a large extent but not fully though, the tier one cities are generally going to be more sensitive to how the global environment or the global macro picture plays out and you are seeing that in cities like Delhi and Bombay, in terms of inflation being a concern, if you look at India's WPI numbers, the big component of that is food prices, they have been climbing steadily and I think in the tier two and tier three cities that is starting to impinge on people's grocery bills which have gone up and spending has gone up on essential items thus leaving less money for discretionary spending, so as that improves I expect tier one to show more improvement to show up first before it percolates down to two-three and in terms of food price inflation I think will definitely have a greater impact in tier two and tire three cities be it a sharper reduction in consume spending and consumer confidence in some of those cities.