Mood of the Consumer 2023: 6 in 10 households surveyed facing an earnings, savings and uncertainty squeeze and want Budget 2023 to provide some respite

January 30, 2023, New Delhi: Lower incomes but higher household expenses during the pandemic had hit a large number of Indian households. For many, the continuing high prices of vegetables, pulses, oil, milk and other essentials over the last 12 months has spelt trouble with sizable percentage of families grappling to make ends meet. Continuing volatility in global prices of crude oil, most commodities and raw materials used in manufacturing together with steep rise in shipping and also logistics cost within the country is getting reflected in price of products and services. In most cases, families’ incomes have not kept pace with high inflation. Unlike those in government jobs, the private sector employees get no relief in the form of DA or any other allowance to offset rising costs. All this is cutting deep into the consumer pockets.

On the inflation front though, there has been a bit of good news lately. The Wholesale Price Index (WPI) based inflation data in December eased to 4.95% after being reported at 5.85% in November. Currently, the WPI inflation is also less than the Consumer Price Index (CPI) inflation which dipped in December to 5.72%, below the Reserve Bank of India's (RBI) upper tolerance level of 6%.

LocalCircles which does its Mood of the Consumer survey two to three times a year conducted its first survey for 2023 to understand the earnings and savings situation of Indian households. In addition, it attempted to understand their outlook from a household finance planning perspective. Over 37,000 responses were received from household consumers across 309 districts of India. 64% of the respondents were men while 36% were women. 42% of the citizens were from metros or tier 1 districts, 34% from tier 2 districts and 24% from tier 3, 4 and rural districts.

7% households project a 25% drop in annual income for FY22-23, 22% project a 10-15% drop while 10% project a drop of up to 10%; 21% uncertain about impact

The first question in the survey sought to estimate the change in household earnings for FY 22-23 which ends in March 2023. It asked respondents “Where do you believe your households earnings will be in the current 12 months FY 22-23 in comparison to the previous 12 months FY 21-22?” In response, 60% of the 12,036 household respondents indicated that they project a drop in household earnings this year. Of them, 7% projected a 25% drop in income, 22% expected a 10-15% drop while 10% expected a dip of anywhere up to 10%; and 21% were uncertain of the level of impact but expected the drop. On the brighter side, 25% of respondents project higher household income, even up to 25% in FY 2022-23, while 7% are not projecting any change as the year closes on March 31, 2023.

56% household consumers surveyed believe their average household savings will reduce in FY 2022-23 while only 19% households expect an increase

One of the biggest issues expressed by household consumers on LocalCircles over the last 12 months has been the need to dip into their savings to make ends meet. With prices of most essentials rising due to a variety of global and domestic factors starting with the Russia-Ukraine war in March 2022, combined with rising costs of products and services that impact a middle-class household, many had to dip into savings to pay that rising school fee or buy a replacement phone. In some other cases, with a loss of job in the family due to layoffs, households had to dip into savings for the bare basics. The next survey question focused on understanding the percentage of households that expect to have reduced savings in FY2022-23. It asked household respondents, “Where do you believe your household will be in the current 12 months (Apr 22-Mar 23) in comparison to previous 12 months (Apr 21-Mar 22)?” In response, 56% felt that their savings will likely dip in the current fiscal year. Of the 11,919 respondents to this question, just 19% indicated that the household savings may increase. The breakup of survey data shows 4% expect that their household savings may “likely increase by 25% or more”; 6% expect a “likely increase by 0-25%'' and another 9% are optimistic of a rise in household savings “but can’t say how much”. Of the remaining respondents, 20% expect the household savings to “likely stay the same”; 24% expect it to “likely decrease by 0-25%”; 26% fear it is “likely to decrease by over 25%”; another 6% expect a “likely decrease but can’t say how much”; and 5% are not as sure on this count. In all, 39% households expect to have some savings in FY 2022-23 just as in the previous year but only 19% expect any increase in savings this year given the many challenges.

52% household consumers surveyed expect economic uncertainty to persist for next 6-12 months

While 2022-2023 started on an uncertain note from a household economic outlook perspective due to the Ukraine-Russia war and impact on inflation, things started to look a little better by July 2022 leading to an average festive season. However, on the jobs front, the hiring sentiment turned negative by November and layoffs began in December leading to uncertainty amongst those employed, especially in the technology and startup and small business sector. The situation has only worsened in January as companies held the bad news till the end of the year. The next question focused on understanding how households accounting for this economic uncertainty in their budget or financial planning and if they believed the same will continue beyond FY2022-23. It asked survey respondents, “In your household financial planning, how long are you accounting for economic uncertainty to last this year?”. In response, 52% out of over 13,000 respondents expressed that they expect economic uncertainty to last 6-12 months while 23% expected the uncertainty to last 3-6 months in 2023. 6% felt uncertainty may only last up to 3 months while 19% opted for can’t say.

In summary, the LocalCircles Mood of the Consumer survey 2023 finds that 6 in 10 households are projecting their earnings to decline in FY 2022-23. In addition, as these earnings have declined, it has impacted their savings as many have been dipping into them to make ends meet. As a result, 56% household consumers are expecting their total savings balance to decline in 2022-23. With already high levels of unemployment and a sizable number of companies in the formal sector laying off people, the economic outlook has become quite uncertain for many households. As households plan their budget for the coming months, 52% are expecting the economic uncertainty to continue for 6-12 months while 23% believe it will be 3-6 months of uncertain period. As the Government presents its Budget 2023, it must keep in mind the earnings, savings and uncertainty squeeze majority of the Indian households are experiencing and provide whatever respite it can to assist them.