New Delhi: Falling income amid higher household spending during the pandemic has hit a large number of Indian households. For many, persistently high prices for vegetables, pulses, oil, milk and other essentials over the past 12 months have caused problems with a large percentage of families struggling to reach two ends. Although global commodity prices have weakened in recent years, they remain high, as do shipping and logistics costs which are reflected in the prices of products and services. In most cases, family incomes have not kept pace with high inflation. Unlike those in government jobs, private sector employees do not receive any relief in the form of DA or any other allowance to offset rising costs. All this has profoundly reduced consumer spending.
On the inflation front however, there has been some good news lately. Inflation data based on the Wholesale Price Index (WPI) in December fell to 4.95% from 5.85% in November. Consumer price index (CPI) inflation fell to 5.72% last month, below the Reserve Bank of India’s (RBI) upper tolerance level of 6%.
LocalCircles conducted its Mood of the Consumer survey, its first survey for 2023, to understand the income and savings situation of Indian households, as well as financial planning. Over 37,000 responses were received from consumer households in 309 districts of India. Of the total, 64% of the respondents were men while 36% were women. 42% of the citizens were metro or tier 1 districts, 34% from tier 2 districts, and 24% from tier 3, 4 and rural districts.
About 7% of households expect a 25% drop in annual income for FY22-23, 22% expect a 10-15% drop while 10% predict a drop of up to 10%. 21% were unsure of the impact.
The first question in the survey sought to estimate the change in household income for the 23rd fiscal year ending in March 2023. It asked respondents “Where do you think your household income will be over the next 12 current months of FY 22-23 vs. previous 12 months FY 21-22?” In response, 60% of 12,036 households surveyed indicated that they expected a decline in household income this year. 7% expected a 25% drop in revenue, 22% expected a 10-15% drop while 10% expected a drop of up to 10%; and 21% were not some of the level of impact but expected a decline.On the positive side, 25% of respondents expect an increase in household income, even up to 25% in FY 2022-23, while 7% do not anticipate any changes at the end of the year on March 31, 2023.
Just over half, or 56%, of consumer households surveyed believe their average household savings will decline in FY23, while only 19% of households expect an increase.
One of the biggest issues expressed by consumer households has been the need to dip into savings to make ends meet. With the rising prices of most basic necessities due to various global and domestic factors starting with the Russian-Ukrainian war, combined with the rising cost of products and services impacting a household of the middle class, many had to dip into their savings to pay for the increase in schooling. charge or buy a replacement phone. In other cases, with a loss of family employment due to layoffs, households have had to dip into savings for the bare minimum.
The next question in the survey focused on understanding the percentage of households that expect to have reduced savings in the 2022-23 financial year. He asked household respondents: “Where do you think your household will be in the current 12 months (April 22-March 23) compared to the previous 12 months (April 21-March 22)?” In response, 56% felt that their savings are likely to decline in the current fiscal year. Of the 11,919 respondents to this question, only 19% indicated that household savings could increase. The breakdown of the survey data shows that 4% expect their household savings to “probably increase by 25% or more”. 6% expect a “probable increase of 0-25%” and 9% are optimistic about an increase in household savings “but cannot say by how much”. Of the remaining respondents, 20% expect household savings to remain the same”; 24% expect it to “probably decrease by 0 to 25%”; 26% fear that it will “probably decrease by more than 25%”; a further 6% expect a ‘likely decrease but cannot say by how much’; and 5% are not so sure about it. but only 19% expect savings to increase this year given the many challenges.
52% of households surveyed expect economic uncertainty to persist over the next 6-12 months.
While 2022-23 started off on an uncertain note from a household economic outlook due to the Ukraine-Russia war and the impact on inflation, things had started to pick up a bit by July. 2022, which has led to an average festival season. However, hiring sentiment turned negative in November and layoffs began in December, leading to uncertainty, particularly in the tech, startup and small business sectors. The situation only got worse in January as companies held off the bad news until the end of the year.
The next question sought to understand how households account for this economic uncertainty in their budgeting or financial planning and whether they believe the same will continue beyond the 2022-23 financial year. He asked survey respondents: “In your household financial planning, how long do you expect economic uncertainty to last this year?”. In response, 52% of the more than 13,000 respondents said they expected the economic uncertainty to last 6-12 months, while 23% expected the uncertainty to last 3-12 months. 6 months in 2023. 6% felt the uncertainty could only last up to 3 months, while 19% opted for cannot say.
In summary, the 2023 LocalCircles Mood of the Consumer survey finds that 6 in 10 households expect their income to decline in fiscal year 2022-23. Also, as those incomes dwindled, it impacted their savings, as many dipped into them to make ends meet. As a result, 56% of consumer households expect their total savings balance to decline in 2022-23. With unemployment levels already high and a significant number of formal sector businesses laying off workers, the economic outlook has become quite uncertain for many households. As households plan their budget for the coming months, 52% expect economic uncertainty to continue for 6-12 months, while 23% believe it will be 3-6 months of uncertain period. As the government presents its 2023 budget, it must bear in mind the pressure on incomes, savings and uncertainty that the majority of Indian households are experiencing and provide them with all possible respite to help them.
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