“India’s revival in consumer spending is likely to be driven by households that earn more than a million rupees a year when the lockdown is lifted,” CMIE said in its weekly analysis.
The consumer sentiments data from CMIE’s Consumer Pyramids Household Survey indicates that while all income groups are worse off than they were earlier, richer households are doing better than the rest on the sentiments front.
Data shows consumer sentiments in March 2021 were down by 46.8% compared to the average in 2019-20,. However, the consumer sentiments of households with annual incomes of less than Rs 400,000 was about 43% than the index in 2019-20 while the consumer sentiments of households with incomes between Rs 400,000 and Rs1,000,000 was about 55% lower than in 2019-20. “This is the group of households whose sentiments are the worst affected,”.
On the other hand, consumer sentiments of households with annual incomes in excess of a million rupees were 40% lower than the 2019-20 average. “These are the least affected households and most likely with the best savings,” it added.
According to CMIE, government’s help to households through direct transfers during the pandemic has been far more modest and skewed in favour of rural households.
“Compared to 2019-20, urban consumer sentiments were down by 51.4% while rural consumer sentiments were down by a lower 44.3%. The distribution is also skewed in favour of richer households,” it said, referring to government transfers to households during the lockdown, mostly in rural India, in the form of MGNREGA, PM-KISAN, etc.
Citing the RBI March 2021 bulletin, CMIE said compared to earlier levels household savings were quite elevated in the first half of 2020-21. The expectation is that when mobility restrictions are removed, households of these economies will be in a strong position to spend. With vaccination underway, such a scenario is not too far,” it added.
The RBI has recently said that household financial savings in India shot up to 21% of GDP in the first quarter of 2020-21 after having averaged at 7.2% in 2018-19 and 8.2% in 2019-20. However, it came down to 10.4% in the second quarter of 2020-21.