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Delhi ranks 1st in curtailing expenses

Posted on Oct 05, 03:09PM | IBNS

Over 71 percent of the respondent from the middle and lower income families across the country overwhelmingly said that steep rise in inflation, less opportunities of jobs and salary packages shrinking over the last year will make their festive seasons lackluster, reveals ASSOCHAM quick survey.

An overwhelming majority of middle and lower families in the country will be forced to rip their spends this festive season than the last year mainly because of persistently rising inflation. They have slashed their festive budget to meet first their monthly expenses.

In a recent ASSOCHAM Survey on "High prices reduce festive spirit" conducted under aegis of ASSOCHAM clearly found a distinction that during last year middle and lower middle income families on average spent nearly 29pc of their salary on Diwali for shopping, sweets, gifting etc.

The survey was conducted in a period of two months beginning August to September 2012 in major places like Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabd, Pune, Chandigarh, Dehradun etc.

A little over 200 employee were selected from each city on an average. Delhi ranks first in curtailing their expenses followed by Mumbai (2nd), Ahmedabad (3rd) Chandigarh (4th), Kolkata (5th) and Chennai (6th),

The survey reveals that double digit food inflation and higher cost of borrowing virtually unaffected high income group in the period as it did not imbalance their earnings and spending.

Many lower and middle income groups indicate that they are finding ways to cut back spending now or indicating they will do so in the future.

High inflation and an uncertain investment environment are the main reasons for buyers cutting down on their spending.

Majority of respondents said that they plan to spend less amount on this festive seasons as the prices have gone up (51pc ), value of saving has gone gown (20pc ), 17pc are saving for big purchase and rest 12pc said that EMI have increased.

Most of the respondents plan to cut down on personal expenses or go bargain hunting to keep their festive budgets in control.

Over 54pc of the respondents will buy only on sale or discounts, 27pc will spend less on sweets, clothes etc., 12pc will buy fewer gifts, 5pc will buy recycle gifts and the rest 2pc will buy a group gift.

Only a small percentage feels that festivals are the time to splurge, even as discounts remain the biggest attraction for most buyers. Over 78pc of the respondents said that if they plan to spend higher discounts will be the incentives for them.

Over 87pc of the respondent said that monthly grocery bills have jumped to about Rs 6,000, compared to Rs 2,000 in the last 12 months an increased of 200pc .

The prices of vegetables and bakery products have also risen in the last few months. Obviously, this will affect the Diwali celebrations.

Majority of the respondent said that increased prices during the festival are robbing the pockets of the common man. With most of the items expensive, people are cutting down the quantity.

Milk, butter, sugar, dry- fruits, flour and labour charges everything that goes into making an irresistible sweet has turned dearer. On the other side, dry fruit and sweets are the most expensive item of Diwali. So, everybody is feeling the pinch of rising cost of every commodity".

Over 68pc of the respondent said that they will spend 3pc on gold items, 27pc of sweets and clothes, 9pc will spend on vehicles, 8pc will spend on gifts, food and drinks , 12pc will spend money on renovating the house and the rest 8pc will spend on electronics.

Only a small percentage of respondents plan to take on more debt or dip into their savings when they go for shopping.

Majority of the respondents said that they will pay for your purchases by use a credit card (47pc ), 39pc will use a cedit card, 11pc will opt for EMIs at 0pc and rest 3pc dip into the savings.

Between 0-20pc respondents will spend 46pc of their monthly take home salary followed by 21-40pc of the respondents will spend 26pc , 41-60pc will spend 17pc , 61-50pc will nearly spend 6pc , 81-100pc will spend amount of 5pc from their monthly budget.

Consumers have become savvy as most of the respondents opted for an instant cash discounts as the best deal, rather than choose ones where they would have to spend more for stuff they may not need, added the survey.

Majority of them look for, discount up to 50pc , 29pc look for buy one, get one free offer, 15pc look for the offer of buy two for the price of one, just 5pc nearly spend Rs. 5,000 to get a gift worth Rs. 500.

Most consumers feel that discounts and freebies should be taken with a pinch of salt as they may not be genuine.

About 9pc of the respondents believe most festive offers by retailers are genuine but about 38pc of the respondents don't believe on these festive offers by retailers. Only some of them (53pc ) believe that these offers are genuine.

ASSOCHAM Secretary General D S Rawat said he strongly feels that any further tightening of monetary policy will aggravate the financial condition seriously, of a large number of people.

There is a strong case to pause any rate increase by RBI as the growth momentum has already hit the manufacturing sector and compressed demand appreciably, he said.

Over the last five years, income has halved and expenditure has doubled. There has been more than 80 to 100pc rise in the prices of essential items.

Over 65pc of the respondent said, "this Diwali they are going to make sweets and savouries at home itself as it will definitely save money and time also. So they may save around 20-30pc by relying on in-house resources."

The government must look to manage its wasteful expenditure by enforcing austerity drive so as to reduce its borrowing from the markets which ultimately have soothing effect on interest rate there by providing some relief on inflation, said Rawat.