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Operation Sindoor: When Indian missiles rained on Pak terror parade

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A lethal combination of stalling growth and persistent inflation has taken a toll on consumers. A telltale sign of a spending squeeze is a cut down in non-essential, discretionary expenditure. The signs are everywhere. Take Solomon Selvaraj, 40, assistant vice-president with Polaris Financial Technology in Chennai. Until 2010, he could afford to take his wife and two daughters on an international holiday every year. In 2011, after the slowdown started, he could only afford a trip to the hills in Uttarakhand.<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/economy-budget-1_021613025348.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>In 2012, his family holidayed in Tamil Nadu. In 2013, he cannot even afford to go on holiday. "Prices have shot up enormously," he says. His income has not kept pace. Eighty per cent of his monthly income of Rs 1 lakh goes in essential expenditure including an expensive home loan. Despite RBI's January rate cut of 0.25 per cent, interest rates are still exorbitant. Selvaraj has to trim expenditure too. "We have cut down on eating out as well from twice a week to much less frequently," he says. His discretionary spending has been almost entirely eliminated in the last year.<br><br>Over in Delhi, Chandan Singh, 43, is faring worse. The standard of living of the regional manager of a sugar manufacturing company in Delhi is deteriorating. His four-year-old laptop needs serious repairs and his washing machine bought a decade ago could use replacement, but he has no money to "splurge". Cinema and eating out are luxuries that he and his family have forgone for now. Says Singh, "For six months on the trot, I have been left with no money at the end of the month. In fact, month-end payments have all been made with my credit card." Singh has stopped using his car and takes public transport. He is contemplating moving back to his home in Bihar. Life there may be more affordable. Like most consumers, Singh has no confidence in the Indian economy.<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/choppy-waters_021613025340.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>The squeeze on consumers is a hard fact. The statistics are revealing.<br><br>- The latest Index of Industrial Production (IIP) for December, released on February 11, confirms the worst for consumers. The rate of growth of consumer durables-like TV sets, refrigerators and cars-declined by 8.2 per cent. The rate of growth in the essential non-durables segment, mostly food and clothes, declined by 1.4 per cent.<br><br>- A survey of consumers released by Credit Suisse (CS) on January 29, 2013, shows that consumer confidence is at a two-year low, worse than in the tough months of policy paralysis through 2011 and early 2012.<br><br>- In January 2013, consumer price inflation rose for a fourth consecutive month to 10.79 per cent. According to the CS survey, 62 per cent of consumers expect inflation to rise, a dampener on spending sentiment.<br><br>- Incomes are not rising. Sixty-six per cent of respondents in the CS survey said their salaries either remained the same or decreased in the last one year. Growth in 2012-13 will be lower than in 2011-12. Increments are, therefore, likely to be less generous.<br><br>- More people in the survey postponed purchase decisions in 2012 than in either 2010 or 2011<br><br>- Consumers have lost confidence in the Government. According to the survey, in 2011, 50 per cent felt it was effective in solving problems. In 2012, that figure is down to 35 per cent.<br><br>- Fifty-eight per cent of India's GDP  is made up of household consumption spending. A dramatic fall in growth (whether to 5 or 5.5 per cent), therefore, hurts consumers the most.<br><br><b><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/chidambaram_021613025321.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>DREAMS DEFERRED</b><br>Consumers are saving more, buying cheaper goods<br><br>The CS survey confirms that Solomon Selvaraj and Chandan Singh are not exceptions but the norm. The mean value of purchases for discretionary spending categories like apparel, sports shoes, watches and perfumes has registered a sharp decline in 2012 compared to 2011. In the same categories, in 2012, the preference for non-branded goods has increased among respondents, evidence of economising on the part of households.<br><br>The impact of the consumer's changing preference has been felt even by small retailers. Yashwardhan Sinha, 52, is the founder of Patna's 9 To 9 supermarkets, the city's first retail chain store that he started in 2002. He admits the falling sales of branded products have put his expansion plans on hold. "Sales have stagnated; in fact, it has slumped in the past one year, as the consumer does not seem to have money or the will to spend on discretionary items after buying essentials. Our sales figures suggest discretionary spending has been cut down by 35 per cent," says Sinha.<br><br>The survey also confirms that a growing number of consumers are postponing purchase decisions. In 2010, close to 80 per cent respondents said it was a good time to make purchases. That number has fallen to under 60 per cent. The survey reveals that Indians are saving more and cutting down expenditure on housing and education, signs of a serious squeeze.<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/diwali-blip_021613025306.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>Sharique Khan, 38, is a manager with a sports channel in Bhopal, where he lives with his wife Nishat, a homemaker, and two children. In the past few months, he has started to feel the pinch of rising prices. His plans of buying a car have been put on hold. "I was planning to buy a new car but now it seems I have to wait for some time. The rising costs of household items and other things have left me with no saving at all." Khan can no longer afford to take his family out for meals at restaurants. "We would usually have dinner at a nice restaurant on weekends but now we have stopped going out," he says.<br><br>The CS survey reveals that in 2012 consumers showed a clear preference for cheaper cars. In 2011, only 25 per cent respondents said they would prefer to buy a car that cost under Rs 4 lakh. In 2012, that number went up sharply to around 35 per cent. Other categories of discretionary spending have also suffered. While more than 30 per cent of respondents in 2010 said they owned a smartphone, the number "splurging" on it was under 25 per cent in 2012.<br><br>What should be of even greater concern to the Government is that people remain pessimistic about the future and have little faith in its ability to turn things around. That a flurry of reforms since August 2012 has failed to boost consumer sentiment augurs badly for the UPA. According to the survey, only 5 per cent respondents expect inflation to moderate. Around 60 per cent expect their personal finances to remain the same or worsen in the next year. And just around 35 per cent have confidence in the Government to improve their standard of living in the year before the General Elections. The onus is on Finance Minister P. Chidambaram to perform some magic in his Budget. To do that effectively, he must first stop insisting that the economy has already turned a corner.<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/inflation-chart_021613025306.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>Chidambaram is furious with the Ministry of Statistics-controlled Central Statistical Organisation (CSO). The agency's forecast of 5 per cent GDP growth for 2012-13 is a damning indictment of the finance minister's six months in office. Between April and September 2012- Pranab Mukherjee was finance minister for much of that periodIndia's GDP grew at 5.4 per cent. By the CSO's estimate, under Chidambaram's stewardship, it will only grow at 4.6 per cent between October and March. If the numbers are right, the net effect of Chidambaram's hyperactive reform is negative.<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/quotes_021613025306.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>The finance minister has several reasons to quibble over statistics. Significantly, a lower growth rate will force him to rework his fiscal deficit calculations. But for ordinary consumers, it makes little difference whether growth is 5 per cent or 5.5 per cent. For them, a squeeze on spending is not an isolated statistic. It is the harsh reality of everyday life. There is no sign of an economic recovery for the ordinary Indian, even if investors are more positive than six months ago. From his recent statements, it appears Chidambaram is almost entirely focused on appeasing investors in his Budget. He should also consider the burden of consumers who will ultimately decide upa's fate at the ballot box.<br><br>The most reliable barometer of a turnaround, in any economy in the world, is a solid recovery in the sale of automobiles. In figures released on February 11, the Society of Indian Automobile Manufacturers (SIAM) says car sales declined 12.5 per cent in the month of January, the third consecutive month of decline and a sharper fall than the 7 per cent recorded in December.<br><br><b><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/big-squeeze-small_021613025230.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div><div class="clicktoenlarge" ><a href="#" target="_blank" rel="dofollow">Click here to Enlarge</a></div></div>THE MISSING RECOVERY</b><br>Key consumer goods sector is still reporting falling numbers<br><br>The automobile industry is now expecting its worst performance in a decade-growth is expected to be negative in 2012-13. "The low sentiment coupled with a decelerating economy is likely to push Indian auto industry to its lowest growth since 2002-03, when car sales dipped 2.1 per cent," siam Director-General Vishnu Mathur said on February 11.<br><br>R.C. Bhargava, the chairman of Maruti Suzuki, India's largest car manufacturer, is downbeat. "There is no evidence to suggest that consumer spending has improved. Factors such as higher inflation and low rate of economic growth continue to deter customers. The past three months have especially not been good," he says.<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/balancing-act_021613025230.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>The story of continued slowdown is also evident in the food and beverages sector, another key sector for discretionary consumer spending. It is also a sector where inflation has a serious impact. Ajay Kaul, CEO of Jubilant Foodworks, which runs the hugely successful Domino's Pizza, says the past three months have been particularly bad. "In the first half of 2012-13, we grew at 41 per cent at the system level and at around 22 per cent at the same store level. In the third quarter, between October and December 2012, the growth fell to 39 per cent at system level and 16 per cent at same store level," says Kaul. He sees this as clear evidence of a drop in consumer sentiment in precisely the same period in which Chidambaram was trying hard to revive investor sentiment. Says Kaul, "What this tells us is that consumers are holding back their consumption." Kaul adds that the popularity of cheaper items on the Domino's menu is rising, which again suggests that consumers are economising.<br><br>The dramatic fall in the consumer durables category in the latest IIP figure for December is reflected in the electronics goods sector.<br><br>Manish Sharma, managing director of Panasonic, says that sales have been poor after Diwali because inflation has been so high. The costs of appliances, by his estimate, have gone up 15-20 per cent. "The overall consumer sentiment in India has not been high of late owing to political and economic instability which affected consumer durable sales across the industry to a great extent. Also, high input costs, rising interest rates and depreciating rupee value led to the rise in the prices of consumer durables," says Sharma.<br><br>Jaideep Rathore, COO of Digiworld, a Videocon-promoted electronics retailer, confirms the slowdown. "Sales have remained at the same level as last year. If there was expectation of 10 or 20 per cent growth, it has not happened. Currently, air conditioner sales have not picked up as expected. LCD televisions are also not selling right now," he says.<br><br><b>THE HOPE TRICK</b><br>Things may get worse for consumers before they get better<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/aruna-nair-quote_021613030328.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/aruna-nair_021613030313.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>The Union Budget is the Government's last chance to shore up the bleak consumer outlook. Chidambaram is in a tight spot. The only sustainable way to boost consumer spending is to revive growth and control inflation. The key to achieving those twin goals is to rein in the runaway fiscal deficit. At the moment, excessive government spending is crowding out both investment and consumer spending. The finance minister is determined to bring the deficit down from a high of 5.9 per cent of GDP in 2011-12 to 5.3 per cent of gdp in 2012-13 and to 4.8 per cent of GDP in 2013-14. In the absence of a firm recovery in growth, Chidambaram may have no option but to raise taxes to meet his targets. That will hurt consumers in the short run.<br><br>Sources in the Government say the finance minister is seriously contemplating a hike in income tax rates to raise revenue. Any hike is only likely on those who earn at least Rs 12 lakh per annum. However, if the higher income groups are taxed, their confidence too will be reduced, further slowing down the economy. The finance minister could try and balance that by giving some tax relief to middle income earners, by modifying tax slabs, in order to boost consumption.<br><br><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/rana-santosh_021613030157.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div><div class="itg-mosimage"><div class="itgimage"><amp-img  src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/rana-santosh-quote_021613030157.jpg" alt = "" height="425" width="650" class="" layout="responsive"></amp-img></div></div>The ministry is also considering a hike in excise duty on manufactured goods from the current 12 per cent to 14 per cent. A 2 per cent hike could yield additional revenue of Rs 40,000 crore to the Government, enough to fund the proposed food security Bill for a year. But this will be a much bigger dampener on consumer spending as the prices of all consumer durables, like cars, ACs, and TV sets will go up. Also, unlike the income tax hike, which will only apply to the highest earners, additional excise duty will have to be paid by all.<br><br>In his last Budget speech in March 2012, then finance minister Pranab Mukherjee had quoted Shakespeare's Hamlet to express his intent: "I must be cruel only to be kind." As it turned out, the only cruelty he meted out was to Vodafone and foreign institutional investors. Chidambaram has no choice but to be somewhat cruel to consumers on February 28, 2013, only to deliver them prosperity at a later date. He will need to communicate this logic effectively and inspire confidence in a diffident consumer. The finance minister will need much more than just the powers of his famed efficiency to please India. He needs to conjure up a bit of magic.<br><br><i>- with Shravya Jain, Amitabh Srivastava, Shuriah Niazi, Banumathi K. and J. Binduraj</i><br><div id="tab-link-wrapper-plugin"><div class="authors__container"><div class="authors__by"><div class="authlable">Published By: </div><div class="authdetaisl">AtMigration </div></div><div class="published__on"><div class="authlable">Published On: </div><div class="authdetaisl">Feb 15, 2013 12:44 IST</div></div></div><div class="sendros">--- ENDS ---</div></div>

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A lethal combination of stalling growth and persistent inflation has taken a toll on consumers. A telltale sign of a spending squeeze is a cut down in non-essential, discretionary expenditure. The signs are everywhere. Take Solomon Selvaraj, 40, assistant vice-president with Polaris Financial Technology in Chennai. Until 2010, he could afford to take his wife and two daughters on an international holiday every year. In 2011, after the slowdown started, he could only afford a trip to the hills in Uttarakhand.<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/economy-budget-1_021613025348.jpg" loading="lazy" /></div></div>In 2012, his family holidayed in Tamil Nadu. In 2013, he cannot even afford to go on holiday. "Prices have shot up enormously," he says. His income has not kept pace. Eighty per cent of his monthly income of Rs 1 lakh goes in essential expenditure including an expensive home loan. Despite RBI's January rate cut of 0.25 per cent, interest rates are still exorbitant. Selvaraj has to trim expenditure too. "We have cut down on eating out as well from twice a week to much less frequently," he says. His discretionary spending has been almost entirely eliminated in the last year.<br><br>Over in Delhi, Chandan Singh, 43, is faring worse. The standard of living of the regional manager of a sugar manufacturing company in Delhi is deteriorating. His four-year-old laptop needs serious repairs and his washing machine bought a decade ago could use replacement, but he has no money to "splurge". Cinema and eating out are luxuries that he and his family have forgone for now. Says Singh, "For six months on the trot, I have been left with no money at the end of the month. In fact, month-end payments have all been made with my credit card." Singh has stopped using his car and takes public transport. He is contemplating moving back to his home in Bihar. Life there may be more affordable. Like most consumers, Singh has no confidence in the Indian economy.<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/choppy-waters_021613025340.jpg" loading="lazy" /></div></div>The squeeze on consumers is a hard fact. The statistics are revealing.<br><br>- The latest Index of Industrial Production (IIP) for December, released on February 11, confirms the worst for consumers. The rate of growth of consumer durables-like TV sets, refrigerators and cars-declined by 8.2 per cent. The rate of growth in the essential non-durables segment, mostly food and clothes, declined by 1.4 per cent.<br><br>- A survey of consumers released by Credit Suisse (CS) on January 29, 2013, shows that consumer confidence is at a two-year low, worse than in the tough months of policy paralysis through 2011 and early 2012.<br><br>- In January 2013, consumer price inflation rose for a fourth consecutive month to 10.79 per cent. According to the CS survey, 62 per cent of consumers expect inflation to rise, a dampener on spending sentiment.<br><br>- Incomes are not rising. Sixty-six per cent of respondents in the CS survey said their salaries either remained the same or decreased in the last one year. Growth in 2012-13 will be lower than in 2011-12. Increments are, therefore, likely to be less generous.<br><br>- More people in the survey postponed purchase decisions in 2012 than in either 2010 or 2011<br><br>- Consumers have lost confidence in the Government. According to the survey, in 2011, 50 per cent felt it was effective in solving problems. In 2012, that figure is down to 35 per cent.<br><br>- Fifty-eight per cent of India's GDP  is made up of household consumption spending. A dramatic fall in growth (whether to 5 or 5.5 per cent), therefore, hurts consumers the most.<br><br><b><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/chidambaram_021613025321.jpg" loading="lazy" /></div></div>DREAMS DEFERRED</b><br>Consumers are saving more, buying cheaper goods<br><br>The CS survey confirms that Solomon Selvaraj and Chandan Singh are not exceptions but the norm. The mean value of purchases for discretionary spending categories like apparel, sports shoes, watches and perfumes has registered a sharp decline in 2012 compared to 2011. In the same categories, in 2012, the preference for non-branded goods has increased among respondents, evidence of economising on the part of households.<br><br>The impact of the consumer's changing preference has been felt even by small retailers. Yashwardhan Sinha, 52, is the founder of Patna's 9 To 9 supermarkets, the city's first retail chain store that he started in 2002. He admits the falling sales of branded products have put his expansion plans on hold. "Sales have stagnated; in fact, it has slumped in the past one year, as the consumer does not seem to have money or the will to spend on discretionary items after buying essentials. Our sales figures suggest discretionary spending has been cut down by 35 per cent," says Sinha.<br><br>The survey also confirms that a growing number of consumers are postponing purchase decisions. In 2010, close to 80 per cent respondents said it was a good time to make purchases. That number has fallen to under 60 per cent. The survey reveals that Indians are saving more and cutting down expenditure on housing and education, signs of a serious squeeze.<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/diwali-blip_021613025306.jpg" loading="lazy" /></div></div>Sharique Khan, 38, is a manager with a sports channel in Bhopal, where he lives with his wife Nishat, a homemaker, and two children. In the past few months, he has started to feel the pinch of rising prices. His plans of buying a car have been put on hold. "I was planning to buy a new car but now it seems I have to wait for some time. The rising costs of household items and other things have left me with no saving at all." Khan can no longer afford to take his family out for meals at restaurants. "We would usually have dinner at a nice restaurant on weekends but now we have stopped going out," he says.<br><br>The CS survey reveals that in 2012 consumers showed a clear preference for cheaper cars. In 2011, only 25 per cent respondents said they would prefer to buy a car that cost under Rs 4 lakh. In 2012, that number went up sharply to around 35 per cent. Other categories of discretionary spending have also suffered. While more than 30 per cent of respondents in 2010 said they owned a smartphone, the number "splurging" on it was under 25 per cent in 2012.<br><br>What should be of even greater concern to the Government is that people remain pessimistic about the future and have little faith in its ability to turn things around. That a flurry of reforms since August 2012 has failed to boost consumer sentiment augurs badly for the UPA. According to the survey, only 5 per cent respondents expect inflation to moderate. Around 60 per cent expect their personal finances to remain the same or worsen in the next year. And just around 35 per cent have confidence in the Government to improve their standard of living in the year before the General Elections. The onus is on Finance Minister P. Chidambaram to perform some magic in his Budget. To do that effectively, he must first stop insisting that the economy has already turned a corner.<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/inflation-chart_021613025306.jpg" loading="lazy" /></div></div>Chidambaram is furious with the Ministry of Statistics-controlled Central Statistical Organisation (CSO). The agency's forecast of 5 per cent GDP growth for 2012-13 is a damning indictment of the finance minister's six months in office. Between April and September 2012- Pranab Mukherjee was finance minister for much of that periodIndia's GDP grew at 5.4 per cent. By the CSO's estimate, under Chidambaram's stewardship, it will only grow at 4.6 per cent between October and March. If the numbers are right, the net effect of Chidambaram's hyperactive reform is negative.<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/quotes_021613025306.jpg" loading="lazy" /></div></div>The finance minister has several reasons to quibble over statistics. Significantly, a lower growth rate will force him to rework his fiscal deficit calculations. But for ordinary consumers, it makes little difference whether growth is 5 per cent or 5.5 per cent. For them, a squeeze on spending is not an isolated statistic. It is the harsh reality of everyday life. There is no sign of an economic recovery for the ordinary Indian, even if investors are more positive than six months ago. From his recent statements, it appears Chidambaram is almost entirely focused on appeasing investors in his Budget. He should also consider the burden of consumers who will ultimately decide upa's fate at the ballot box.<br><br>The most reliable barometer of a turnaround, in any economy in the world, is a solid recovery in the sale of automobiles. In figures released on February 11, the Society of Indian Automobile Manufacturers (SIAM) says car sales declined 12.5 per cent in the month of January, the third consecutive month of decline and a sharper fall than the 7 per cent recorded in December.<br><br><b><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/big-squeeze-small_021613025230.jpg" loading="lazy" /></div><div class="clicktoenlarge" style="width:230px;margin-right:15px text-align:center" valign="bottom"><a href="#" onclick="javascript:window.open('https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/big-squeeze-large_021613025230.jpg','window','status=no,resize=yes,toolbar=no,scrollbars=yes,width=1221,height=917'); return false;" rel="dofollow">Click here to Enlarge</a></div></div>THE MISSING RECOVERY</b><br>Key consumer goods sector is still reporting falling numbers<br><br>The automobile industry is now expecting its worst performance in a decade-growth is expected to be negative in 2012-13. "The low sentiment coupled with a decelerating economy is likely to push Indian auto industry to its lowest growth since 2002-03, when car sales dipped 2.1 per cent," siam Director-General Vishnu Mathur said on February 11.<br><br>R.C. Bhargava, the chairman of Maruti Suzuki, India's largest car manufacturer, is downbeat. "There is no evidence to suggest that consumer spending has improved. Factors such as higher inflation and low rate of economic growth continue to deter customers. The past three months have especially not been good," he says.<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/balancing-act_021613025230.jpg" loading="lazy" /></div></div>The story of continued slowdown is also evident in the food and beverages sector, another key sector for discretionary consumer spending. It is also a sector where inflation has a serious impact. Ajay Kaul, CEO of Jubilant Foodworks, which runs the hugely successful Domino's Pizza, says the past three months have been particularly bad. "In the first half of 2012-13, we grew at 41 per cent at the system level and at around 22 per cent at the same store level. In the third quarter, between October and December 2012, the growth fell to 39 per cent at system level and 16 per cent at same store level," says Kaul. He sees this as clear evidence of a drop in consumer sentiment in precisely the same period in which Chidambaram was trying hard to revive investor sentiment. Says Kaul, "What this tells us is that consumers are holding back their consumption." Kaul adds that the popularity of cheaper items on the Domino's menu is rising, which again suggests that consumers are economising.<br><br>The dramatic fall in the consumer durables category in the latest IIP figure for December is reflected in the electronics goods sector.<br><br>Manish Sharma, managing director of Panasonic, says that sales have been poor after Diwali because inflation has been so high. The costs of appliances, by his estimate, have gone up 15-20 per cent. "The overall consumer sentiment in India has not been high of late owing to political and economic instability which affected consumer durable sales across the industry to a great extent. Also, high input costs, rising interest rates and depreciating rupee value led to the rise in the prices of consumer durables," says Sharma.<br><br>Jaideep Rathore, COO of Digiworld, a Videocon-promoted electronics retailer, confirms the slowdown. "Sales have remained at the same level as last year. If there was expectation of 10 or 20 per cent growth, it has not happened. Currently, air conditioner sales have not picked up as expected. LCD televisions are also not selling right now," he says.<br><br><b>THE HOPE TRICK</b><br>Things may get worse for consumers before they get better<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/aruna-nair-quote_021613030328.jpg" loading="lazy" /></div></div><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/aruna-nair_021613030313.jpg" loading="lazy" /></div></div>The Union Budget is the Government's last chance to shore up the bleak consumer outlook. Chidambaram is in a tight spot. The only sustainable way to boost consumer spending is to revive growth and control inflation. The key to achieving those twin goals is to rein in the runaway fiscal deficit. At the moment, excessive government spending is crowding out both investment and consumer spending. The finance minister is determined to bring the deficit down from a high of 5.9 per cent of GDP in 2011-12 to 5.3 per cent of gdp in 2012-13 and to 4.8 per cent of GDP in 2013-14. In the absence of a firm recovery in growth, Chidambaram may have no option but to raise taxes to meet his targets. That will hurt consumers in the short run.<br><br>Sources in the Government say the finance minister is seriously contemplating a hike in income tax rates to raise revenue. Any hike is only likely on those who earn at least Rs 12 lakh per annum. However, if the higher income groups are taxed, their confidence too will be reduced, further slowing down the economy. The finance minister could try and balance that by giving some tax relief to middle income earners, by modifying tax slabs, in order to boost consumption.<br><br><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/rana-santosh_021613030157.jpg" loading="lazy" /></div></div><div class="itg-mosimage"><div class="itgimage"><img  title=""  class="" alt="" src="https://akm-img-a-in.tosshub.com/sites/media2/indiatoday/images/stories/2013February/rana-santosh-quote_021613030157.jpg" loading="lazy" /></div></div>The ministry is also considering a hike in excise duty on manufactured goods from the current 12 per cent to 14 per cent. A 2 per cent hike could yield additional revenue of Rs 40,000 crore to the Government, enough to fund the proposed food security Bill for a year. But this will be a much bigger dampener on consumer spending as the prices of all consumer durables, like cars, ACs, and TV sets will go up. Also, unlike the income tax hike, which will only apply to the highest earners, additional excise duty will have to be paid by all.<br><br>In his last Budget speech in March 2012, then finance minister Pranab Mukherjee had quoted Shakespeare's Hamlet to express his intent: "I must be cruel only to be kind." As it turned out, the only cruelty he meted out was to Vodafone and foreign institutional investors. Chidambaram has no choice but to be somewhat cruel to consumers on February 28, 2013, only to deliver them prosperity at a later date. He will need to communicate this logic effectively and inspire confidence in a diffident consumer. The finance minister will need much more than just the powers of his famed efficiency to please India. He needs to conjure up a bit of magic.<br><br><i>- with Shravya Jain, Amitabh Srivastava, Shuriah Niazi, Banumathi K. and J. Binduraj</i><br><div id="tab-link-wrapper-plugin"><div class="authors__container"><div class="authors__by"><div class="authlable">Published By: </div><div class="authdetaisl">AtMigration </div></div><div class="published__on"><div class="authlable">Published On: </div><div class="authdetaisl">Feb 15, 2013 12:44 IST</div></div></div><div class="sendros">--- ENDS ---</div></div>

A survey of consumers released by Credit Suisse on January 29, 2013, shows that consumer confidence is at a two-year low, worse than in the tough months of policy paralysis through 2011 and early 2012.

India Today

Consumers are buying the least in two years. Incomes are stagnant. Can Chidambaram Budget revive consumer confidence?

End of spending: Consumers are buying the least in two years. Incomes are stagnant. Can Chidambaram's Budget revive their confidence? - India Today

Consumers are buying the least in two years. Incomes are stagnant. Can Chidambaram's Budget revive consumer confidence?

End of spending: Consumers are buying the least in two years. Incomes are stagnant. Can Chidambaram's Budget revive their confidence?

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Consumers are buying the least in two years. Incomes are stagnant. Can Chidambaram's Budget revive consumer confidence?

A survey of consumers released by Credit Suisse on January 29, 2013, shows that consumer confidence is at a two-year low, worse than in the tough months of policy paralysis through 2011 and early 2012.

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