Inflation is currently the worst nightmare for the Indian finance ministry and despite interest rate hikes, things don’t look very good. Even during the 2008 recession, when the developed countries were struggling with a bleeding economy, India managed to swim through the troubled waters and maintain growth rates to the tune of 7-8%.
Turn to 2011, and the growth forecasts are being revised on a regular basis. Inflation has been cited as a major hindrance in the context of growth in emerging markets and investors have cited unabated inflation in India as a cause of concern.
Inflation for the common man simply means that the purchasing power is going down. The thing about inflation is the fact that the calculation is rather complex and even with a marginal decrease, consumers don’t see any changes in their purchasing power.
Things continue to become costlier and the recent petrol price increase despite crude oil prices going down is an example of that. Nielsen India has come up with a very insightful video / infographic highlighting how inflation has impacted the price of goods in India and how consumer spending patterns have shifted due to inflation.
Value of Winning During Inflation
The short video takes you through the price changes in various basic and necessary commodities, consumer spending behaviors and additional insights on what segments continue to flourish despite high inflation.Some of the highlights include
Price Increase Of Commodities in India
- Fuel Prices have gone up by 25% in the past one year
- Onion prices have gone up by 50% in the past one year (This is shocking and something that directly impacts the bottom of the pyramid)
Middle Class Is Spending Less *
- Majority of consumers in the segment say that they don’t intend to buy new clothes or take a vacation
- There are some positives as well. 75% of the consumers are opting for car-pooling to save fuel costs and a similar number are now carrying homemade lunches to office
Impulse Item Sales Jump
- Even as consumption of basic food items decreased last year, impulse item such as chocolates witnessed increased sales (in value terms)
The video also has some other data points which are especially useful for FMCG marketing folks. To see the incremental impact of price increases in a basis points may not seem too high but aggregated version does present a worrying picture. I mean onion prices have gone up by 50% for crying out loud. Wonder what’s in store as inflation in India continues to rise with a sure fire solution out of sight.
What are your thoughts on rising inflation and its impact on consumer spending behavior? Have you altered your spending patterns within the past year
*The data points are based on survey results from Assocham. I could not find out the total sample size but the trend is promising