Easing inflation no respite for people's financial woes: Kantar report

Rural market 'bright spot' for consumer goods products, says consumer research firm

Almost a third of India is under “severe financial stress” and consumers are finding it difficult to manage their expenses though inflation has eased, said a new report by Kantar on Friday, adding the rural market was a “bright spot”.

“Inflation might have slowed down to acceptable levels, but its effects are not lost on the consumer,” said market research firm Kantar’s FMCG Pulse report, adding that the average shopper spent 18 per cent more in the quarter ended March 2024, compared to two years ago in the quarter ended June 2022.

A typical Indian household spent Rs 49,418 in Q1CY24 (the first quarter of the calendar year). However, this number is heavily influenced by the larger rural market, where expenses were around Rs 41,215 in the quarter. Urban households in general spent 1.6 times more than their rural counterparts, the report said. Meanwhile, less affluent households spend just about Rs 38,000 quarterly, which is 0.9 times the expenses in the rural.

Additionally, the southern part of the country is now the highest spender, having increased its expenses by 35 per cent in the last two years.

Groceries are the biggest household expense, comprising more than 24 per cent of all quarterly expenses. Spending on household goods has increased 19 per cent since June 2022, translating into a quarterly jump of Rs 2,000 in household expenses.

“At the peak of inflation in 2022, only 8 per cent of the households responded that they are comfortable with their then financial situation. As of Q1 ’24, this number has jumped to 16 per cent,” said the report, referring to the calendar year.

“However, in both the rounds there were 34 per cent of the households that were finding it difficult to manage their expenses. In other words, a third of India is still under severe financial stress.”

‘Bright star’

“A bright star this year is the resurgence of the rural market. Rural’s growth started trailing urban’s growth since the last calendar quarter of 2022, and urban raced ahead while rural continued to limp its way for the most part of 2023,” said the report.

Sales volumes in the rural market grew to 5.8 per cent in Q1CY24, up from the 4.8 per cent in Q4CY23. Volume growth in the urban market fell to 4.7 per cent in Q1CY24 from 5.6 per cent in Q4CY23.

The rural market outpaced the urban in the first quarter of CY24. Price corrections by manufacturers have helped the recovery to an extent. In addition to this, the Kharif harvests haven’t been bad, which has also lifted the sentiments. It is also important to note that the fundamentals of the rural economy were never weak,” K Ramakrishnan, managing director (South Asia), Kantar Worldpanel, told Business Standard.

Some factors will continue to do well for rural markets. Government continuity is likely to translate into stability in the market and fewer changes to the interim Budget, which had a rural focus.

“What we are seeing now is the beginning of recovery, and we expect a full recovery to occur sometime during the second half of 2024,” Ramakrishnan added.