Consumer confidence hits low; hopes pinned on new govt: ASSOCHAM study

Posted By: Religare
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Consumer confidence hits low; hopes pinned on new govt: ASSOCHAM study
Be it borrowing on the credit cards, bank advances against time deposits or borrowing from the micro credit markets, they all indicate the consumer confidence in the economy touching a new bottom and it will take some big-ticket initiatives by the government to lift the morale of both consumers and the businesses, an ASSOCHAM study, ahead of general elections has indicated.

Mirroring the state of consumer confidence, which is a key drive of the economic growth, the study brings out a disturbing trend and a paradox. The lesser spending by consumer is not even contributing to any increase in savings either- reflecting pressure on the household budgets resulting in avoidance of discretionary borrowings, it said.

The credit card outstanding have seen a negligible growth of 1.6 per cent in the current financial year so far (April -January) while the propensity to borrow short-term for spending against time deposits has seen a sharp erosion of four per cent between April 2013 and January 2014.

The current financial year which has been one of the most tumultuous period has also shaken the confidence of the consumers with smaller needs- one who looks towards small bank loans for his micro needs. The micro credit has also witnessed a massive decline in growth of 5.9 per cent in the current fiscal as against 15.7 per cent year on year January, 2014 versus January, 2013.

Despite some FII money pouring in the Indian stock and debt markets in the recent past, the Indian equity market lacks depth and mid-cap and small caps shares in a shambles and the retail investors really not enthused about investment in equity.

"It seems erosion in generation of new employment and lack of confidence about retaining the jobs with scores of companies going in for cost-cutting , the demand for discretionary goods, especially on bank loans is bound to see further drop......" the study said.

The paper said that if a stable government is voted, the first major turnaround will be seen in the financial markets with FIIs focusing on India. This will help the country's current account deficit and may prompt the government to relax the restrictions on gold imports, which in turn will see revival in the entire gems and jewellery industry. Besides, better inflows will result in improved strength for rupee.

Read more about: assocham
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