With the rising prices of fuel and essentials amidst the COVID-19 impact, as many as 79% consumers believe their household earnings for FY21-22 will decline, while 49% expect decline in savings, as per a survey conducted by LocalCircles.
According to the survey, 79% households say they are getting less value for the same or more money spent in the past three months and 76% consumers want the government to reduce excise duty on petrol and diesel prices; majority wants it reduced by 20%.
At the time the COVID-19 outbreak has brought many levels of financial distress in India's economy vis-à-vis citizens' income, reports are rife with sky-rocketing prices for household essentials and consumers are already experiencing the pinch.
According to LocalCircles, households in most parts of the country are paying more for the same list of essential and grocery items compared to the same months of 2021 and 2020. It says, "The prices of household essentials such as edible oil, soap, shampoo have increased by 4-20%. The prices of vegetables have also soared due to insufficient supply coupled with high demand and rising prices of petrol and diesel."
India reported retail inflation at 6.3% in May and June. India's largest milk brands, Mother Dairy and Amul have increased prices by Rs2 per litre this month. Similarly, food inflation is currently at 5.58%, pulses at 10.01%, fruits at 11.82%, transport at 11.56%, fuel and light at 12.68%, and oil and fat inflation is at 34.78%.
"This is happening at a time when the price of petrol and diesel has crossed the Rs100-mark in most states of India. In April-May when several states observed lockdown-like restrictions, the fuel price increased 15 times. Delhi has petrol priced over Rs101 while in Mumbai its price has crossed Rs107.
"States like Rajasthan now have petrol and diesel priced at Rs112 and Rs102, respectively. The price of petrol has crossed Rs100 per litre in at least 16 states and union territories (UTs). When the prices of petrol and diesel rise, it has an adverse impact on how citizens commute, how much essentials and other goods cost, and how people draw up their personal finances and household budgets," LocalCircles says.
According to the survey, 65% households have paid 25%-100% higher prices this year for vegetables in comparison to December - February 2021.
In many vegetable mandis across states hit by the lock-down and restrictions till the end of May, the prices of vegetables saw a rise in prices followed by the impact of the price of petrol and diesel. The prices of food articles have risen by nearly 5% in April, while primary commodities saw a rise of 10.16%, and price of manufactured products went up by 9.01%.
To better understand from consumers, the first question in the survey asked consumers how much higher price their household paid on an average for vegetables in comparison to December to February 2021. In response, 5% of households said they have paid 'higher by 100%', 27% said 'higher than 50-100%' while 33% said 'higher by 25%-50%' and 21% say 'higher by 0-25%'.
There were only 9% of households who paid the same as last year, and 2% paid less, while 3% could not say anything. On an aggregate basis, 65% of households say they have paid 25%-100% higher prices this year for vegetables in comparison to the period before the 2nd wave of COVID. This question in the survey received 16,165 responses.
As many as 79% households say on monthly essentials or grocery costs they are getting less value for the same or more money spent in comparison to December-February 2021.
Experts, citing government data, say that trade of perishable vegetables in the retail market goes up at different rates across states due to several factors from disrupted supplies, and unchecked regulation on its trade.
A report by Kotak Institutional Securities in June suggests that prices of household essentials such as soap and shampoo has increased by 4%-20%, edible oil by 12%-42%, packaged tea by 4%-8%, coffee by 2%-7%, to name a few.
Meanwhile, a few states have started taking action against vegetable hoarders, to ensure affordable prices in the market but with limited success.
Another question in the LocalCircles survey asked consumers about the change in their monthly household grocery and essentials costs in the past three months. In response, 10% say they are spending same and getting less, while 16% said they are getting the same value on the same amount.
On the other hand, 46% of consumers are spending more money but getting less value and 23% are spending more and getting the same value. Breaking down the poll, 2% are spending less amount and getting more value. About 3% did not have an opinion. This question in the survey received 8,510 responses.
According to the survey, 47% consumers now expect COVID uncertainty to last six to twelve months in their household budget planning.
"One of the lessons we can draw from 15 months into the Coronavirus-induced pandemic is to be prepared for the unexpected. A lot of what happens in the coming months will depend on the spread of COVID-19, and how speedily the vaccination programme reaches consumers of all age groups.
India's daily caseload hit an all-time high of 414,188 on 7 May 2021. While cases have now declined to almost 40,000 a day, they are not going down further," LocalCircles says.
The next question in the survey sought to understand the perception of consumers on how long they expect their households' finances to last from April 2021 to March 2022. In response, 3% say 'up to 1 month', 11% say '1 to 3 months", 30% say '3-6 months', and 47% say '6-12 months' while 9% did not have an opinion. This question in the survey received 9,084 responses.
In the survey, 49% consumers believe their average household savings will reduce in 2021-22 in comparison to 2019-20.
The survey also tried to know how consumers estimate COVID to impact their household savings in the period from April 2021 to March 2022. In response, 19% of consumers said their household savings will 'likely stay the same'".
Breaking down the poll, 11% of consumers say their savings will 'likely increase by 25% or more', 8% say, 'likely to increase by 0-25%', and another 8% say will 'likely increase but can't say how much'. There were also 19% of consumers who say their savings will 'likely decrease by 0-25%', 17% say, 'likely to decrease by over 25%', and 13% said 'likely decrease but can't say how much' while 5% of consumers did not have an opinion. This question in the poll received 14,059 responses.
With the second wave of COVID, many people are more likely to dip into savings to cover their household expenses with 49% now expecting their savings to decline in FY 21-22, LocalCircles says.
A similar question was asked to consumers in a May 2020 survey, when 46% of consumers were expecting their savings to decline.
This percentage has increased marginally to 49% of consumers now expecting their savings to decline in the financial year 2021-22 given the intensity of the 2nd wave of COVID-19. For instance, the percentage of consumers who say their income 'will likely decrease by over 25%' has risen from 13% in the May 2020 survey to 17% in the latest survey. Similarly, consumers saying their income 'will likely decrease by 0-25%' have risen from 18% to 19%.
LocalCircles says, 76% consumers want the government to reduce excise duty on petrol and diesel; highest number of consumers wants it reduced by 20%.
Along with the rise in the price of daily essentials and dip in households' income, fuel prices have been hitting newheights. The price of petrol has crossed Rs100 per litre in at least 16 states and Union Territories.
While the base price, per various studies, comprises 36% of the retail petrol price, states' value-added tax (VAT) makes up 23% of the final fuel price. Other factors in the retail price of petrol and diesel include excise duty and road and infrastructure levied by Union government, agriculture infrastructure cess, BS-IV premium, marketing cost and margins, and dealers' commission.
The final question in the survey asked consumers what the government should do to provide immediate relief to consumers on petrol and diesel prices. In response, 46% want the government to cut excise duty by 20% on petrol and diesel. 18% want excise duty cut by flat Rs10 on both, and 12% want it cut by flat Rs15 on these fuels. There were only 12% of consumers who think that the government should not take any action, and another 12% did not have an opinion. On an aggregate basis, 76% of consumers want the government to reduce excise duty on petrol and diesel. Of whom, the majority want it to be reduced by 20%. This question in the survey received 7,255 responses.
India observed the countrywide lockdown from the end of March till September 2020. The economy had just started to recover post-unlocking but then followed the 2nd wave of COVID-19, related lockdowns and curfews, which again made a significant impact on the households' economy.
Over the past 15 months or since the beginning of the outbreak, households' income has been significantly impacted after earning members of the family lost jobs, faced salary cuts and delays vis-à-vis altered their purchase pattern, consumption of products and services, and change in their savings plan.
The Reserve Bank of India (RBI) in its latest survey says that the country's consumer confidence fell to an all-time low in May 2021, driven by a sharp fall in expectations on the general economic situation, employment scenario and household income over a one-year horizon.
It further says that households' spending declined, with essential spending showing signs of moderation, while non-essential spending continues to contract. This has forced many Indians to take loans.
According to a credit information company (CIC) report, nearly half of the country's working population of 400 million is in debt, with at least one loan or credit card. As per the latest RBI data, loans against gold have jumped a whopping 82% since March 2020.
After receiving thousands of posts and comments about earnings, savings, rising fuel prices and cost of essentials, LocalCircles says it conducted its mood of the consumer survey to understand how much higher price people are paying to purchase vegetables in comparison to December 2020 to February 2021, or before the 2nd wave of COVID hit India. It also tried to understand the change in people's monthly household grocery and essentials costs in the past three months.
The survey then tries to seek out Indian households' preparedness in their financial planning, including their savings and earnings outlook for the year 2021-22.
It compares the findings with similar surveys conducted in April 2020 and August 2020 to understand how the mood of the consumer has changed over the period. Given the steep rise in fuel price, the survey also sought to understand what should be done by the government, both Union and state, to provide immediate relief to consumers.
The survey received more than 70,500 responses from citizens across 382 districts of India. About 63% respondents were men while 37% respondents were women. Nearabout 43% respondents were from tier-1, 29% from tier-2 and 28% respondents were from tier-3, tier-4 and rural districts.