Mumbai: A collapse in consumer spending in India, the bedrock of the economy, shows very little sign of rebounding anytime soon.
Shoppers have largely been absent in recent weeks as India began reopening its economy in phases from one of the world’s biggest pandemic lockdowns. Job losses are rising, households are being weighed down by debt, risk-averse financial institutions are unwilling to lend and social-distancing measures are keeping buyers away from markets.
With consumption making up some 60% of India’s economy, the slump is weighing on Asia’s third-largest economy, which is on track for its first contraction in more than four decades.
What Bloomberg’s Economists Say
An improvement in demand “looks set to be a slow and gradual process as consumer sentiment remains weak, government is beginning to make expenditure cuts to compensate for lower tax collections, and businesses are likely to preserve cash and delay investment spending plans given the current environment.”
— Abhishek Gupta, India economist
In the absence of official retail sales data, here are five charts that illustrate how subdued consumption and spending is in India:
The number of consumers visiting retail stores in India have fallen sharply, according to data from ShopperTrac. Footfalls were down nearly 30% month-on-month in May, after recording a more than 90% drop in April at the height of the nationwide lockdown, the data shows. ShopperTrac’s index is based on inputs from collection devices in the retail marketplace and shopper visits.
Total number of credit card transactions fell sharply in March, according to data from the Reserve Bank of India. The lockdown was imposed in the last week of March, but activity was slowing even before the announcement was made.
Consumers are also spending less on their credit cards, according to the central bank data. Expenditure dropped to nearly 507 billion rupees ($6.7 billion) in March from 625 billion rupees a month ago.
Consumer confidence collapsed in May with the current situation index touching a historic low, according to the central bank, with 100 representing the dividing line between pessimism and optimism.
Future spending doesn’t look very promising either. The latest consumer sentiment survey shows Indians have turned pessimistic about their spending over the one-year horizon, with the reading falling below 100. –Bloomberg