confidence in India has fallen by 11 points to 122, the lowest level in the last five runs of the Nielsen Global Consumer Confidence Index survey, which measures consumer confidence, major concerns and spending habits in 51 countries. Some 42 per cent of the Indian online consumers who took part in the survey believe that their country is currently in an economic recession.
Globally, the latest Nielsen Consumer Confidence Index has dropped to 88 - down six points in the last six months and the largest single drop the index has recorded in the last three years. India dropped from 133 points in the last leg of the survey in November 2007 to 122 points. Across countries, the US has suffered the biggest fall in the Confidence Index, dropping 17 points.
Overall, Asia Pacific consumers are still amongst the most confident in the world. Five of the global top 10 countries hail from the Asia Pacific and the overall total for the region is one point above the global average. However, for many emerging countries in Asia that have enjoyed the fruits of economic growth and the boom in recent years, the last six months have been a stark wake-up call as consumers find themselves struggling with double-digit inflation, rising unemployment rates and stagflation for the first time in a decade.
"The last six months have been a turbulent period for the global economy and this has impacted the growth of the Indian economy as well. The rising crude oil prices, inflation and growing unemployment rates have all diminished consumer spending powers and have in a way shaken the Indian consumer's confidence," says Sarang Panchal, managing director, customised research, Greater China and Asia Pacific, The Nielsen Company.
However, all is not lost. Despite the drop, India ranked second on The Nielsen Consumer Confidence Index, with 122 points, just behind Norway, which scored 129 points. Indian consumers continue to be the most confident in the region, despite posting a dramatic 11 point fall. India is one of the few markets that stand to gain from the grim economic outlook. In recent years, India has established itself as a hub for outsourcing technical and support staff, and as belts in the world's leading economies tighten, we may well see India's economy and the confidence of its consumers soar.
Portugal, Korea and Japan languished at the bottom of the rankings as the world's most pessimistic nations.
Indians are optimistic about the local job prospects over the next 12 months. At 86 per cent, Indians are the second most optimistic people where the job market is concerned over the next 12 months. Around 26 per cent of the Indian respondents said they considered job prospects in the country "excellent", while 60 per cent respondents said job prospects were "good".
The promising job prospects over the next 12 months make Indians confident about their personal finances over the same period. Around 12 per cent of the Indian respondents said they considered their state of personal finances to be "excellent", while 67 per cent said it was "good" in the next 12 months. At 79 per cent in this positive frame of mind, India figures along with Denmark and Indonesia in the list of countries most optimistic about personal finances.
"In spite of an alarming inflation rate, India is still a growing economy with the GDP ranging at around 9 per cent. There is still demand for talent in the market and, especially with the entry of various multinational brands, the job market looks lucrative," explains Panchal.
Good job and financial prospects have sufficiently loosened the Indian purse and 45 per cent of the respondents surveyed were optimistic that this was the perfect time to buy things they want or need.
Indians are shopping more and buying well known brands as seen in the recent Luxury Brands Survey done by Nielsen, where India figured amongst the top three most brand conscious countries in the world. This shows that good jobs, hefty pay packages and exposure to global lifestyles are pushing the Indian consumer towards luxury items. "So, even when there is an economic recession globally, Indians are splurging and optimistic about their finances," adds Panchal.
Compared to the last leg of the survey, the percentage of people putting their spare cash into savings has increased by 5 per cent and the percentage investing in shares and mutual funds has dropped by 3 per cent.
It is interesting that despite a downturn in the economy, concerns about inflation, etc., the percentage of Indian respondents who do not have any spare cash after their monthly essentials have been paid for remains the same - 4 per cent - as in the last leg of the survey. This shows that the majority of Indian consumers have money left even after meeting their essential expenses.
Savings are still a priority for Indians and 59 per cent Indians put their spare cash into savings, 48 per cent invest in stocks and mutual funds, this being the fourth highest percentage globally.
"Today, Indians are more careful about the financial risks that they want to take. The fluctuating market conditions have curbed risk taking behaviour and made Indian consumers opt for saving, rather than take a chance with their money on the market," says Panchal.
Spending on holidays and vacations has increased by 4 per cent (to 37 points) and shows the growing interest of Indians in travelling and seeing the world. Incidentally, the amount of money spent on home improvement (27 per cent) and new technology (27 per cent) has been impacted by the rising inflation rates and dropped by 3 and 2 percentage points, respectively.
Paying off debts/ credit cards/ loans (35 per cent), buying new clothes (34 per cent), out of home entertainment (28 per cent), and retirement fund (22 per cent - fifth highest globally) are other areas where Indians spend their spare cash.
The Nielsen Global Online Consumer Survey, conducted by Nielsen Customized Research, was conducted in April 2008 among 28,253 Internet users in 51 markets in Europe, Asia Pacific, North America and West Asia. The survey provides insights into current confidence levels, spending habits/ intentions and the major concerns of consumers across the globe. The Nielsen Consumer Confidence Index is developed based on consumers' confidence in the job market, the status of their personal finances and their readiness to spend.