Consumer confidence tumbles in July over jobs, eco situation: RBI survey

RBI’s July survey was conducted in 13 cities, with 5,351 responses on households’ perceptions and expectations about the general economic situation, the employment scenario, the overall price situation and their own income and spending.

The survey suggested Indians are feeling less optimistic about spending.

The findings of the RBI survey come at a time when a slowdown in consumption is prompting households to either postpone big purchases or shop for better bargains in the market. As the economy continues to grow at a sluggish pace this is hurting both industry and households.

Sunita Chawla, a 37-year-old housewife in Lucknow, said she is waiting for Diwali to buy a smart refrigerator in the hope of better discounts. But Chawla may have to wait longer, as a modest hike in her husband’s salary this year is not enough to manage rising expenses. “Our festive season spending will be modest,” she said.

Ramanpreet Singh, a 42-year-old schoolteacher in Delhi, went grocery shopping last month to a big departmental store instead of her local kirana in search of better deals. “I got cash back, and offers such as ‘buy one get one free’ on handwash and packets of pasta,” said Singh, a mother of two, adding that she will continue shopping at places where she can save money.

Shoppers like Chawla and Singh are a cause of worry for makers of everything from cars to soaps, and washing machines.

“The drop in consumer confidence is very evident from the slowdown we are seeing in many sectors,” said Kamal Nandi, Business Head and Executive Vice-President of Godrej Appliances. “With the news of jobs cuts, etc, we are seeing a conservative rather than a spending behaviour among consumers.”

In such a scenario, Nandi said, both new shoppers and those looking to upgrade their appliances postpone their decisions unless driven by factors such as weather. Some manufacturers have also cut down on inventory due to a slump in demand, he added.

Nandi said manufacturers are now looking forward to the festive season starting with Onam in September to scout for signs of revival.

Other retailers said shoppers have gone easy on impulse buying.

“Shoppers are more planned in their purchases, so-called impulse purchases have come down,” said Vasanth Kumar, Managing Director of Lifestyle International that runs a chain of departmental stores. Kumar added that the apparel retailer has also been witnessing a dip in footfall over the last few months prompted by new store openings and muted demand.

In response, retailers are not overstocking inventory and are holding on to any price hikes. Promotions inside stores are compensating for the drop in footfalls, he added.

“The rate cut could make a difference to middle income households,” said Nandi.

“With higher liquidity in the system, we expect banks to respond positively by transferring the benefit to borrowers through interest rate cut. This will lead to an increase in disposable income at the hands of borrowers and create a spike in consumption,” he added.