To my mind, as a non-economist watcher of consumers, and of companies that serve them, the slowdown in growth rates in individual categories of consumption and of companies is not a matter of surprise and concern.
Consumers can only buy if domestic and export economic activity are high enough to give them more and/ or better-paid work to grow their incomes. And, if God is kind and monsoons are normal and the crop is good but not too good, if the government gives them money in some form or the other, if banks give them loans and if they are confident enough of repaying them. Or, if non-banks giving unsecured personal loans continue to have the money and the risk appetite to do so. And above all, if they are confident enough to spend today rather than save today and spend tomorrow because they are surer about their incomes.
That performance on each of these conditions has been slowing down is known; the welcome news, therefore, is that consumption is still holding up very well so far. The FMCG company heads have themselves said that they have done well in the quarter all things considered, and not in a defensive kind of way. “Have delivered a strong performance for the quarter despite some moderation in rural market growth …,” says HUL chairman; “market momentum remained strong,” says Nestle India chairman. Asian Paints announced that it saw double-digit growth in decorative business – paints etc.; Bajaj Auto top line growth in the quarter has been positive despite all the gloom and doom in automobile sector; Jio at its lowest price point has seen its revenue grow by 7 per cent; Bajaj Finance, the middle-class lending maestro, has clocked results that reflect no slowdown.
I might also add that India is a nation where only about a quarter of the households have a chief wage earner who gets a regular monthly salary. Self-employed people have fragile confidence levels, but none of the data shows that those who can afford to spend are too spooked to spend. What the data does show is that those who are poor are in bad shape.
Let’s evaluate the results of the large companies against this backdrop. By and large, we have seen 7 to 9 per cent volume growth in several companies, and slightly higher revenue growth – and this is definitely profitable growth. This is good quality growth, not on the back of cost inflation-driven price increases (we have hardly had any in the last year), not on the back of imprudent lending bubbles, or B1G3F marketing – buy one get three free marketing. Nor is it on the back of strong government stimulus. And it is growth across the board at premium and popular price points. This is core growth, the best kind in the worst of times. It is not as high as we would like it to be and nowhere near as bad as it is made out to be. It is a great base to build on and any uptick on any of the consumption-influencing parameters discussed here will bring it back into the number zone that is comfortable for many economy watchers.
Two last comments on India’s consumption story and how to read it. Cars always bounce back quickly and make up for lost sales the minute things get better. Car buyers are usually people who are in the top 10 per cent income bracket, who have enough surplus and income to buy a car and are prized customers for banks to lend to. When they don’t buy, it’s because they want to save their money now, knowing that they can buy at any time they choose to. Two-wheeler buyers, however, do represent the entire affluence spectrum of Indian consumers – and company performance has varied from bad to good in this category.
Second, it is a fight between various categories for the consumers’ wallet share at this time of the year. The visa facilitation centres are full, tickets for travelling abroad are not easily available, and at the exchange rate we have, there’s no money to buy durables as well. This is also the season of capitation fees, new books, college admission fees and there is no slowdown in consumption there and middle and poor India is borrowing from informal sources to manage that.
Finally, rich urban India, which accounts for a major share of consumption, hasn’t been hit as hard as rural India in income growth, and has not seen runaway cost increases on any count. India’s consumers desire to consume but won’t over-burden themselves with debt in order to do that. That is good news. At 7 per cent-a-year growth, we will see another HUL added to HUL in just a decade. Nielsen predicts an 11-12 per cent in the categories it covers, and that’s good news too.
So, maybe, we should get used to the new normal and be thankful for consistent good quality core growth. Consumption cannot bail out an ailing economy. It is the consequence of a good or bad economic environment, no matter which way we calculate GDP.
Rama Bijapurkar is the author of We Are Like That Only and A Never-before World: Tracking the evolution of Consumer India. Views are personal