Letter to BS: Consumer sentiment governs market demand for commodities

This refers to "Consumer demand grows 3.14%, lowest in 17 quarters" (August 30). In this context, the projected growth in consumer demand of private final consumption expenditure (PFCE) of 3.14 per cent is more due to demand for fast moving consumer goods (FMCG) — basically essentials — than due to developmental growth. The index of industrial production (IIP) showing a meagre percentage of increase substantiates this. Job losses and inflation are the basic causes of a fall in demand. However, raising conjectures on the actual percentage of growth is only self-deceit and cannot offer meaningful solutions. 

Further, as rightly pointed out, consumer sentiment governs market demand for commodities. In the prevailing scenario, the consumer hesitates to spend for anything other than essentials. They face liquidity problems, thus lowering demand leads to economic paralysis. However, merely blaming endogenous and exogenous factors does not address the problem and active policy measures to revive economic activity should be undertaken. Investment should be given greater importance for economic revival as non-utilisation of the spending power will only lead to further economic deterioration. Such a situation is to be addressed at the grassroot level by increasing supply of commodities through promotion of small and medium industry with an initial capital support by the government. Capital support should not be merely monetary but also infrastructural. 

C Gopinath Nair, Kochi

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