After a COVID-19 pandemic-led contraction in customer spending in 2020, household spending will return to development in 2021, expanding by as significantly as 6.6 per cent, Fitch Solutions stated on Monday.
Consumer spending is forecast to have contracted by 12.6 per cent in 2020.
“While growth will return to positive in 2021, we do note the recovery will be slower than most countries, as a result of the significant contraction over 2020,” it stated. “Unemployment will remain heightened, while the effectiveness of government support measures is questionable.” Fitch Solutions forecast a return to pre-COVID-19 levels only more than the second half of 2021 and 2022.
“We forecast household spending in India to return to growth in 2021 after the COVID-19 pandemic led to a contraction in consumer spending in 2020,” it stated.
In nominal terms, total household spending will only be 1.2 per cent greater than what it was in 2019 (Rs 123 lakh crore in 2021, compared to Rs 121.6 lakh crore in 2019), indicating the extent of the effect that the COVID-19 pandemic has had on customer spending.
Fitch Solutions stated all of the major customer spending categories will return to good development in 2021.
However financial effect of 2020 has produced a important base impact across a quantity of categories.
Food and non-alcoholic drink spending have been prioritised in household budgets in 2020 and so development in spending of these things, even though remaining good, will be slightly decrease than in 2020.
“We forecast food and non-alcoholic drinks spending to grow by 7.9 per cent year-on-year in 2021, from the 10.1 per cent growth we forecast for 2020,” it stated.
Spending with other customer categories is estimated to record important contractions more than 2020 as households reduce spending on non-necessary things.
As such, these categories will develop from a fairly decrease base more than 2021 and hence will report stronger development more than the year.
India recorded its 1st COVID-19 case on January 30, 2020, with the government announcing a nation-wide lockdown on March 24, which lasted till late May.
Localised lockdowns are also getting made use of in containment zones and have been extended to November 30.
Containment measures and restrictions contain travel restrictions, closing educational establishments, gyms, museums, and theatres bans on mass gatherings and encouraging firms to market remote operate.
The Indian government 1st announced relaxation measures in geographical regions designated as non-hotspot from April 20, 2020. Domestic air travel resumed on May 25. The gradual easing of restrictions has come beneath 5 levels.
On September 30, 2020, the government issued ‘Unlock 5.0’ recommendations, which permitted for state governments to choose on reopening schools and other educational institutions, immediately after October 15, in a graded manner.
Entertainment hubs, such as cinemas/theatres/multiplexes, are now open, but beneath a 50% capacity rule. The ceiling on mass gatherings has been extended to 200 persons.
The most up-to-date government announcements on October 27 extended localised lockdowns till November 30, beneath the exact same recommendations as in ‘Unlock 5.0’.
“Our forecasts take into account risks that are highly likely to play out in the short term, such as the easing of government support. However, there are risks to outlook that if they do start to play out will lead to forecast revisions,” Fitch Solutions stated.