Middle-class Indians hit hard by rupee’s fall: Survey

http://economictimes.indiatimes.com/markets/forex/middle-class-indians-hit-hard-by-rupees-fall-survey/articleshow/20683742.cms

By Udit Prasanna Mukherji, TNN | 20 Jun, 2013, 06.22PM IST
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As the Re slumps to new lows, the country's middle class has been forced to cut back on eating out, buying branded products or new cars, studying abroad etc. as their monthly expenditure has risen by 20%
As the Re slumps to new lows, the country’s middle class has been forced to cut back on eating out, buying branded products or new cars, studying abroad etc. as their monthly expenditure has risen by 20%

KOLKATA: As the Indian rupee slumps to new lows, the country’s middle class has been forced to cut back on eating out, buying branded products or new cars, studying abroad etc. as their monthly expenditure has risen by 20 per cent, a study by Assocham revealed Thursday.

The middle income group has been impacted most by inflation particularly in context of the rupee slumping to new lows and its cascading effect leading to price rise of petroleum products, edible oil, studying abroad, foreign trips, as their monthly expenditure has risen by 15-20%, according to the survey.

The quick survey was conducted by Assocham in major places like Delhi-NCR, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabad, Pune, Chandigarh, Dehradun etc. A little over 200 people were selected from each city on an average.

Earlier today, the Indian rupee slumped to another record low of 60 against the dollar after the US Federal Reserve signalled an end to its monetary stimulus that would help in further strengthening of the greenback.

Age group of respondents
Middle-class Indians hit hard by rupee's fall: Survey

“Over 92 per cent of the respondents said that their monthly bills have jumped by 15-20 per cent in the last one month – the middle class and the lower class are the worst hit,” said the survey.

According to Assocham, going to fancy restaurants has been hit the hardest with around 78 per cent of middle class Indians avoiding eating out.

In addition, 65 per cent have stopped buying foreign branded goods, while 49 per cent are spending less on home appliances and 32 per cent have put plans to buy a new car on hold.

The survey reveals that rupee depreciation impacted consumers in metros and other major cities the most vis-a-vis tier-III and semi urban areas.

However, people are in no mood to pay heed to finance minister P Chidambaram’s request not to buy gold for the sake of the health of the Indian economy.

Sectors
Middle-class Indians hit hard by rupee's fall: Survey

“Despite the effort by the government to control gold imports, the Indian middle income group is bound by societal traditions and continues to buy gold even at higher prices which have increased the prices of gold due to rupee weakening”, said D S Rawat, secretary general Assocham.

Around 55 per cent of the survey respondents fall under the age bracket of 20-29 years, followed by 30-39 years (26 per cent), 40-49 years (16 per cent), 50-59 years (2 per cent) and 60-65 years.

The survey was able to target employees from 18 broad sectors, with maximum share contributed by employees from IT/ITes sector (17 per cent). After IT/ITeS sector, contribution of the survey respondents from financial services is 11 per cent. Employees working in engineering and telecom sector contributed 9 per cent and 8 per cent respectively in the questionnaire. Nearly 6 per cent of the employees belong from the market research/KPO and media background each. Management, FMCG and infrastructure sector employees share is 5 per cent each, in the total survey. Respondents from power and real estate sector contributed 4 per cent each. Employees from education and food & beverages sector provided a share of 3 per cent each.

Consumers’ growing unease is reflected in their saving and spending habits, with many middle and lower income groups indicating that they are finding ways to cut back spending now or indicating they will do so in the future, added Rawat.

The weakening rupee has made crude oil, fertilizers and iron ore, which India imports in large quantities, costlier. Though these items are not for daily consumption, they impact the finances indirectly, said Rawat.

The survey further reveals that crude palm oil prices set the pace for prices of other edible oils. It is imported in large quantities and any rise in its price will add to the inflationary pressure.

Assocham nationwide survey also revealed that the middle class, uncomfortable with weak rupee, are changing their overall spending habits, including money spent dining out, vacations, electronics etc.

The falling rupee will also impact itinerant Indians and vacationers to a foreign country. Air fares are going up, foreign stay will be costlier by at least 15-20% while shopping can become expensive by 12-15%. Eating out will also be costlier by 5-8%, adds the survey.

There are certainly some changes in travel patterns’ as majority of them are opting for non-dollar destinations such as Sri Lanka, Dubai, Bali and Phuket or sticking to domestic destinations such as Kashmir, Kerala and Goa, adds the Assocham survey.

As per Assocham estimates, Indian students paying fees in US currency will have to arrange for more rupee funds for the same amount of dollar fees. Since March 2012, rupee has weakened by 15%, reflecting the higher cost that students have to pay now compared to last year. Indian students who are going abroad for their higher education will see high expenditure due on their food, living expenses and stay cost.

Electronic consumer goods such as computers, televisions, mobile phones, etc, with imported components will also become costlier. International food chains which run outlets in India are not denying the impact on profitability.

Assocham findings are as follows

* Average monthly expenditure has increased by 15-20%.

* 78% have decreased spending on international food chains and rest preferred on occasions.

* 65% decrease in the amount they spend on foreign brands.

* 77% per cent indicated fall in the amount they spend on foreign vacations.

* 49% plan have decreased the amount they spend on home appliances; 44% for home and personal electronics; 32% for automobiles.

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