Inflation may hamper spending of consumers this festive season: Assocham

Business

oi-Sneha

By Sneha B K

Published: Friday, October 5, 2012, 11:10 [IST]

According Assocham survey it may be lacklustre festive season due to high inflation, which will have its affect on the middle-class, lower income people this year in India.

Over 71% of the respondent from the middle and lower income families across the country overwhelmingly said that steep rise in inflation, less opportunities of jobs and salary packages shrinking over the last year will make their festive seasons lackluster, reveals ASSOCHAM quick survey.

An overwhelming majority of middle and lower families in the country will be forced to rip their spends this festive season than the last year mainly because of persistently rising inflation. They have slashed their festive budget to meet first their monthly expenses.

In a recent ASSOCHAM Survey on "High prices reduce festive spirit" conducted under aegis of ASSOCHAM clearly found a distinction that during last year middle and lower middle income families on average spent nearly 29% of their salary on Diwali for shopping, sweets, gifting etc.

The survey was conducted in a period of two months beginning August to September 2012 in major places like Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabd, Pune, Chandigarh, Dehradun etc. A little over 200 employee were selected from each city on an average. Delhi ranks first in curtailing their expenses followed by Mumbai (2nd), Ahmedabad (3rd) Chandigarh (4th), Kolkata (5th) and Chennai (6th),

The survey reveals that double digit food inflation and higher cost of borrowing virtually unaffected high income group in the period as it did not imbalance their earnings and spending. Many lower and middle income groups indicate that they are finding ways to cut back spending now or indicating they will do so in the future.

High inflation and an uncertain investment environment are the main reasons for buyers cutting down on their spending. Majority of respondents said that they plan to spend less amount on this festive seasons as the prices have gone up (51%), value of saving has gone gown (20%), 17% are saving for big purchase and rest 12% said that EMI have increased.

Most of the respondents plan to cut down on personal expenses or go bargain hunting to keep their festive budgets in control. Over 54% of the respondents will buy only on sale or discounts, 27% will spend less on sweets, clothes etc., 12% will buy fewer gifts, 5% will buy recycle gifts and the rest 2% will buy a group gift.

Over 87% of the respondent said that monthly grocery bills have jumped to about Rs 6,000/-, compared to Rs 2,000 in the last 12 months an increased of 200%. The prices of vegetables and bakery products have also risen in the last few months. Obviously, this will affect the Diwali celebrations.

Over 68% of the respondent said that they will spend 3% on gold items, 27% of sweets and clothes, 9% will spend on vehicles, 8% will spend on gifts, food and drinks , 12% will spend money on renovating the house and the rest 8% will spend on electronics.

Only a small percentage of respondents plan to take on more debt or dip into their savings when they go for shopping.

Majority of them look for, discount up to 50%, 29% look for buy one, get one free offer, 15% look for the offer of buy two for the price of one, just 5% nearly spend Rs. 5,000 to get a gift worth Rs. 500.

ASSOCHAM Secretary General, Mr. D S Rawat strongly feels that any further tightening of monetary policy will aggravate the financial condition seriously, of a large number of people. There is a strong case to pause any rate increase by RBI as the growth momentum has already hit the manufacturing sector and compressed demand appreciably.

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