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Updated on: Saturday, August 28, 2021, 01:31 PM IST

Real household spending in India to post 8.9% growth: Fitch

PTI
Poor consumer demand has impacted credit growth as people postponed their non-essential spending: Fitch | Image by ongchinonn from Pixabay

Poor consumer demand has impacted credit growth as people postponed their non-essential spending: Fitch | Image by ongchinonn from Pixabay

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Fitch Solutions has forecast real household spending in India to post a growth of 8.9 per cent year-on-year in 2021 following a contraction of 9.3 per cent in household spending estimated over 2020.

This marks the beginning of a recovery in spending with total household spending in real terms forecast to reach Rs 72.6 lakh crore in 2021, below 2019 (pre-pandemic) levels of Rs 73.5 lakh crore. As a result, said Fitch, the recovery of India's consumer and retail sector will spill into 2022 where it forecast real household spending growth to reach 7.1 per cent.

"In 2022, we project real household spending to reach a total of Rs 77.7 lakh crore. This is 5.8 per cent larger than total spending in 2019, indicating that a full consumer spending recovery will take place in India in 2022."

In 2020, consumer confidence in India took a hit and fell to a five-year low of 49.9 (September 2020) and 97.9 (May 2020) for the current situation index (CSI) and future expectations index (FEI) respectively.

Fitch said the poor consumer demand has impacted credit growth as people postponed their non-essential spending.

In July 2021, India's CSI scored 49 despite the latest wave of Covid-19 outbreak tapering off, indicating that consumers hold a gloomy outlook of the current and short-term economic situation which will weigh heavily on consumer spending.

However, the FEI is trending upwards from a low of 96.4 in May 2021 to 104 in July 2021 which suggests that consumer spending on big ticket items will likely be deferred until the economic and health situation in the country stabilises.

"Our forecast for a full recovery in real consumer spending growth in India in 2021 is in line with our country risk team's forecast that the domestic economy will grow by a real rate of 9 per cent, recovering from the 7.3 per cent contraction recorded in 2020."

Fitch said economic growth will be underpinned by consumer spending, easing unemployment and continued investments in the country's infrastructure sector, thus creating more jobs.

"With India's economy expected to fully recover in 2021, we believe that more conventional growth patterns will return in 2022. As such, we project that the country's economy will expand at 7.6 per cent in 2022."

Fitch said the recovery in consumer spending in India in 2021 and 2022 will be supported by the government stimulus measures enacted in 2020 and 2021.

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Published on: Saturday, August 28, 2021, 01:31 PM IST
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