Recession Finally Takes Its Toll on Consumer Confidence in India, According to Nielsen Survey

Consumer Confidence in India has finally started to reflect the sentiments of consumers in the rest of the world. With a 15 point drop in its Nielsen Consumer Confidence Index, India ranked third with 99 points, behind Indonesia which topped the Confidence rankings with 104 points and Denmark, which came second with 102 points in the latest round of Nielsen Global Consumer Confidence study. India ranked #1 in the Nielsen Consumer Confidence ranking in the last round of the survey in October 2008.

A twice yearly study, the Nielsen Global Consumer Confidence survey tracks consumer confidence, major concerns and spending habits among 25,140 Internet users in 50 countries.

“The current economic state has a direct impact on confidence levels of consumers. In recent times consumers have experienced an onslaught of bad news in the form of job cuts, company profit plummeting, bankruptcies and foreclosures, which has led to a reduction in consumer confidence and people’s spending power,” said Vatsala Pant, Associate Director, Consumer Research, The Nielsen Company, India.

The latest Nielsen Global Consumer Confidence Survey, (conducted 19 March - 2 April 2009), saw consumer confidence across countries take a beating, falling seven Index points from 84 to 77 in the latest round of the survey. Consumer Confidence fell in 49 out of the 50 countries surveyed; Taiwan was the only country to buck the global trend, edging up three points from 60 to 63.

Though, consumer confidence has dropped in India, it is also true that most respondents remain quite optimistic about the situation changing in the next twelve months. 56 percent of Indians think the country will be out of economic recession in the next twelve months - the second highest percentage for a country globally, behind Vietnam with 60 percent - which thinks their country will be out of an economic recession in the next twelve months.

Indians still among the optimistic ones

Consumer Confidence in India may have fallen but it is not yet vanquished. Compared to other countries in the Nielsen survey, India remains quite an optimistic country. 47 percent of Indians have an optimistic perception about local job prospects in the next twelve months, with six percent considering them to be ‘excellent’ and 41 percent considering them ‘good’. Indians are the second most optimistic behind Indonesia (with 54 percent), when it comes to job prospects over the next twelve months.

Indians perceptions towards the state of their personal finances in the next twelve months also reflect a fallen, but not defeated, outlook. Sixty two percent of Indian respondents consider the state of their personal finances to be either ‘excellent’ (6%) or ‘good’ (56%) for the next twelve months - ranking Indians fifth most optimistic globally when it comes to their personal finances.

However, while Indians may be fairly optimistic about job prospects and the state of their personal finances in the next twelve months, only three percent consider the current environment to be an ‘excellent’ time to buy the things that they want or need, while a further 37 percent consider it a ‘good’ time to make those purchases.

Spending spare cash

For Indians, Putting into Savings (66%) remains the most important thing to do with spare cash after covering essential living expenses - ranking Indians the sixth greatest savers globally. Compared to the last round of the Nielsen Global Consumer Confidence survey, the percentage of Indians putting their spare cash into savings has increased from 58 to 66 percent, reflecting the more conservative mindset of Indians currently.

Paying off debts/ credit cards/ loans follows as the second most popular thing to do with spare cash, garnering 38 percent of Indians’ votes, representing a four percent increase compared to the last round of the survey. Investing in shares of stock or mutual funds ranked third for one third of respondents, and a nine percent drop in comparison to the previous round.

“Indians have become more conscious about the way they handle money. In an uncertain economic future, people are taking fewer risks on the stock market and are attempting to get on top of their liabilities as fast as possible in terms of debts and loans. Indians are saving as much as they can at the moment to ensure they have a nest egg behind them in case they need to dig into it at a later date,” continued Pant.

New technology products (27%), New clothes (27%), Holidays and Vacations (25%), Home improvements/ decorating (22%), are other areas where Indians spend their spare cash, albeit all have experienced a decline vs. 2nd half, 2008.

Indian respondents putting their spare cash into a Retirement fund increased from 20 to 22 percent - the 5th highest percentage globally and quite high relative to the global and regional percentage of 10 percent who put spare cash into Retirement funds.

“For Indians today, cash is king. People have become a lot more concerned about their future and their attitude towards money reflects that. They are diverting more cash into items that will give them financial security on a rainy day,” said Pant.

Major concerns ahead

For more than two in five Indians (44%), Job Security tops the list of major concerns in the next six months, and the ninth highest percentage globally. Job security has seen a sharp increase – more than doubling, in fact - compared to the previous round of the Nielsen survey where it was a major concern for only 19 percent of Indian respondents. Worldwide, the Economy remains the number one concern for the world’s consumers, but in India it is the second major concern with 38 percent votes.

“Fears of unemployment and job security have reached new heights, with global redundancies affecting every industry. But Indians are more worried about their own jobs than they are about what is happening about the overall economy elsewhere,” continued Pant.

Whereas Terrorism topped the global charts in the October’08 survey, this time round it has dropped a little in importance for Indians. India ranks number two with 16 percent votes for its concern over terrorism, the number one spot taken over by Pakistan with 18 percent votes. It is interesting to note that globally only three percent of respondents are concerned about terrorism.

Other major concerns for Indians include Work/Life balance (16%), Children’s education &/or welfare (13%), Parents’ welfare & happiness (13% - 6th highest globally), Political Stability (12% - 9th highest globally), Global Warming (8% - 9th highest globally), Debt, Health, and Increasing food prices (all 7%), Increasing utility bills (6%), etc.

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