The Coronavirus pandemic has brought drastic changes in the way, India is consuming things. People are largely buying items which are essential and consuming them frugally. There is a fear that replenishment may not be as prompt, as goods are not reaching kiranaas or retail shops with same alacrity due to production cuts and also transportation challenges.
Many online delivery services were also stopped briefly only to resume operations later with curtailed operations. While, the pandemic has put a dent on at-home consumption, the sale of non-essential items have gone for a toss. Online marketplaces are not catering to requests for non-essential items at all. Initially it was because of pending orders which mounted on account of sudden lockdown announcement. Now, there is a government order that restricts them from selling non-essential items on their platforms, temporarily. The government insists that these measures are to minimise risks of coronavirus spread.
After human health, economic activity has been the biggest casualty of the ongoing health crisis, forcing largescale shutdowns of businesses across the country. Though, the government has partially lifted restriction and has allowed some economic activity in green and orange zones in the second phase of the lockdown, which continues till 3 May. It has also allowed resumption of sale of non-essential items in residential areas.
One may call this a temporary blip with hope that things would improve once lockdown restrictions are lifted. But, will that be the case? It doesn’t look like that.
In a recently released Consumer Confidence Survey (CCS) by the Reserve Bank of India (RBI), the consumer confidence was recorded to be at an all-time low with the expectations for the year ahead remaining largely unchanged.
This survey is an indicator of what lies ahead for the people in general, companies and the government. While, India was seeing a slowdown in growth numbers with successive sub 5 per cent quarterly growth prior to the start of Covid-19 pandemic in India, its occurrence has accelerated the fall. There were suggestions already from all quarters, for the government to work on improving consumption to revive the economy. The task looks more arduous now as the economic revival is in for a long haul.
The RBI survey was done in early March, in 13 major cities – Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram – seeking people’s perception and expectations on general economic situation, employment scenario, overall price situation and own income and spending. Over 5,300 households were interviewed in the process.
The silver lining, however, is that the current perception around most indicators viz economic situation, employment, price level and income marginally improved in March from January, though still in red. Meanwhile, ‘spending’ which is the final indicator of the Consumer Confidence Index (CCI), and has been in green in January and March surveys, has shown signs of deterioration.
As far as the expectations for the year-ahead period are concerned, the sentiments around economic situation, employment scenario and income have marginally improved in March from January. In both surveys, people were slightly optimistic on the aforementioned indicators. In the March survey, people expressed a greater worry on ‘Price Level front’ for the year-ahead period, fearing stiff inflation.
On Spending, the sentiments were largely positive in the year ahead period with marginal downward correction.
The survey, however, does not spell out the impact of Coronavirus pandemic. At least, the survey does not suggests so. Its impact cannot be discounted now.
It is not difficult to understand why even after the lockdown is lifted, the consumption habit may not improve significantly.
Even before the first case of coronavirus was reported in India, the country had witnessed successive quarters of sub 5 per cent GDP (Gross Domestic Product). The reports of low consumptions were doing the rounds, especially from rural belts. Economists and industry were seeking government interventions with recommendations of putting money into the hands of common people.
Coronavirus pandemic has only exponentially added to our woes. Fitch has revised growth estimates for 2020-21 (April-March) from 1.8 per cent to just 0.8 per cent. For a country with over a billion people, growing at this pace would be disastrous, to say the least.
In the pre-coronavirus phase, India witnessed unemployment not seen in 45 years according to several media reports, quoting a leaked NSSO report. Employment determines consumption and spending habits. Post coronavirus phase looks worst with largescale job cuts already announce in the organised sector; people asked to take hefty pay cuts with several organisations even asking employees to work without pay.
Those who have jobs have been keeping a close vigil on situation, unfolding.
The unorganised sectors have been decimated with daily wagers, especially migrants facing a double whammy – they are without work and caught in the middle, with nowhere to go.
According to an analysis by a top media house, 32 per cent of Indian households who contribute about 24 per cent to household expenditure are daily-wage workers. Middleclass accounts for 36 per cent of consumption expenditure. These two segments have been hit badly.
As for the industry, all major Fast Moving Consumer Good Companies (FMCG) companies have expressed a bleak consumption scenario for India. Multinational Unilever’s commentary on emerging markets including India are not very encouraging. Likewise, ITC and Marico are also not very optimistic, under current situation. Most companies are working under capacity.
There will be challenges on getting manpower and raw materials as well, once lockdown is lifted.
While, the country is fighting against corona, with government claiming that the curve has begun to flatten, voices from different quarters have already started emanating for a post-covid plan.
It is everybody’s guess as to how government will mend things once the lockdown restrictions are lifted. While, it is very important not to lose sight of the current challenge since the cases have been on the rise, lately, one cannot afford to not plan for future.
The slope has become much steeper now. Whether, there is a plan…we don’t know.