The hype over the recovery notwithstanding, packaged goods companies need to brace up for a tough year ahead, as a recent Boston Consulting Group study says consumers will save more and cut back on discretionary spends during the next 12 months.
The study done in March 2009 across a group of 1,800 urban consumers and 350 rural consumers with an annual income of over Rs 100,000 stated that cuonsumers were pessimistic about the state of the economy and expected things to get worse.
Consumer spending, which had been growing at 10 per cent year-on-year, will now decrease. Over 34 per cent of the respondents said they would cut spends, while 16 per cent said would spend more in the coming year.
"This sentiment has significant impact on short term spending as discretionary spends will decrease and sectors like leisure and luxury personal care will be affected," said Abheek Singhi, partner and director, The Boston Consulting Group.
However, compared to other countries where the survey was conducted like Brazil, China, Mexico, Russia, Japan, Canada, United States and Europe , Indian consumers are more confident and optimistic.
The survey divided the respondents into five categories where the most affected were the mid to high income (affluent) class in the metros, as well as the low-income city dwellers, as they had the lowest job security.
The small town affluent and rural India remained largely unaffected by the slowdown in the economy, whereas the small town low income category were feeling the pinch but it was primarily due to their low incomes, noted the survey.