Keep pace with the change

Long-term planning is passé. Companies need to periodically reassess the business environment and explore ways to rebuild consumer confidence, especially during difficult times.

- R SUMITRA

Indian economy’s graph started moving southward in 2019, as indicated by the fall in GDP growth, consumer confidence index, employment rates, and the Index of Industrial Production (IIP). This trend was reflected in the business environment too. As per Reserve Bank of India’s Industrial Outlook Survey of the Manufacturing Sector, Business Assessment Index (BAI) recorded its steepest fall since the 2008 financial crisis. Sluggishness in key industry segments is an indicator of the economy being caught in a vicious cycle. Uncertainty triggered by the coronavirus has added to the economic woes.

People are unsure about the economic situation, employment scenario, and earnings. As per RBI’s Consumer Confidence Survey (CCS), consumer confidence collapsed in May 2020 with the index touching a historic low. There has been a sudden fall in income for many, leading to a sharp cut in discretionary spending as well as a major drop in demand; however, consumption of ‘essential commodities’ like masks, sanitisers, personal computers, and data cards is picking up. The overall situation has brought about a radical change in consumer behaviour too—there is an increased demand for health and hygiene products, and online delivery is being preferred to store visits.

Most households are resetting their budgets with the intention to save for the future. In a recent survey by Bank Bazaar, 52 per cent of the respondents said that savings and debt repayment were their top priority.

Consumption trends