Indians are optimistic by default

So how optimistic do you feel? While many of us may feel that the future does not look all that bright, as a culture, we Indians by default tend to be optimistic — every bad experience is still believed to have some good in it for us! In a very different way, that optimism seems to reflect even in today’s recessionary context where the world today remains firmly ensconced in a credit-crunch mode and consumer confidence across the world has taken a dip.

In such a scenario, India has topped the Nielsen Global Consumer Confidence Index with 114 points. Moreover, at 51 per cent, Indians are also the most optimistic lot globally, who think that their country will be out of the economic recession in the next 12 months.

 

Conducted in the midst of the global financial crisis, the latest survey reveals that global consumer confidence has taken a further beating, dropping from its peak of 99 in 2006 to 84 this time round. Of the 52 markets surveyed, 43 (or 82 per cent) have recorded a decline in the Consumer Confidence Index from the first half of 2008. In such conditions, it is the fast developing markets that are turmoil-proof with their consumers appearing to be more optimistic, as evidenced by the performance of the BRIC markets — India tops the world as the most optimistic, Brazil and China recorded an increase in their Index score and Russia ranked the fifth most optimistic — all gained pace as the global top 10 most optimistic countries.

Despite the global economic recession, Indians seem to be quite confident of the economy picking up in the near future — they believe that the global recession will have a limited impact on India given that the domestic market is large enough to support continued growth. Also, across sectors, most multinationals are expected to invest into India as it appears to be one of the few growth markets which have the potential to tide them over the 2009 recession. Therefore, irrespective of global conditions, corporations and consumers in India are aware that their long-term prospects will remain strong.

Moreover, Indian investors have also been safeguarded by the country’s relatively nascent financial market, where savings accounts are still preferred and one is seeing the fixed deposit re-emerge as a recommended investment option. According to Nielsen’s 2008 Money Monitor, Indians are more comfortable going back to the traditional mode of putting their hard-earned money in fixed deposits and saving for a secure tomorrow, than they are spending for a comfortable today.

Optimism rides the wave
While Indians have recognised the impact of the slowdown, there persists, what I would call, a “tempered optimism” — very few are saying that it is an excellent world of opportunities, but there is a distinct majority which still thinks it’s a good opportunity. The Indian economy — even at an adjusted approximate six-to-seven per cent expected growth — still makes for a good job market, though the conditions might not be as good as they were in the past few years. Also, the growth opportunities in India are better than most other countries at the moment. This is a sentiment expressed by 75 per cent Indians — despite the decline in Consumer Confidence Index, 16 per cent of Indian respondents consider job prospects in the country “excellent” and 59 per cent respondents consider the job prospects “good”.

The slightly tempered optimism on job prospects is also reflected in Indians’ perception about the state of their personal finances over the next 12 months — 77 per cent of Indian respondents consider the state of their personal finances to be “excellent” to “good” for the next 12 months. This positive tone makes India emerge as the most optimistic country as far as personal finances are concerned.

Utilising spare cash
Saving for a rainy day is still a priority for Indians but they don’t want to lose out on opportunities to create and recreate wealth. Even in an economic downturn, Indians are cautious but still interested in investing in shares and mutual funds if they have spare cash. So when it comes to spending spare cash, 58 per cent of Indians still believe in putting their spare cash into savings, a conservative mindset but one which has buffered Indians in the recent downslide of the financial market. Forty-two per cent Indians invest in shares of stock or mutual funds, a drop of six percentage points from the last leg of the survey but still the fourth highest percentage globally.

Forty per cent of Indian respondents remain confident that now is a good time to buy things they want or need. In the spending of spare cash, it’s new clothes (32 per cent) that top the list, followed by new technology products (28 per cent), home improvements/decorating (27 per cent), out-of-home entertainment (20 per cent), and retirement fund (20 per cent — seventh highest globally).

It is seen that while Indians’ intentions to spend on personal comforts such as new clothes, home improvements/decorating, technology products is stronger than the global average, their intention to spend on holidays/vacations, out-of-home entertainment is much lower. On the whole, this indicates a general tendency among Indians to live a comfortable day-to-day life by cutting out the frills/add-ons. Holidays and vacations have, in fact, experienced a steep drop from 37 per cent in the last leg of the survey to 27 per cent this time round. It shows that Indians are less inclined to travel under the current circumstances and are even likely to cut down on their travel expenditure.

In effect, there are gaps and opportunities for savvy marketers as the spending sentiment is still quite strong in India versus other countries. Segmenting the market and addressing the high value segments, besides the vulnerable set, will help tide through the tough times. Investment in brands today is necessary to secure brand loyalty for better times ahead, particularly, for daily-use products/luxuries. When the opportunity for extraneous distractions drops, the focus on self/routine breaking regulars/small luxuries will grow.

Terrorism, a major concern
Besides economy (25 per cent), terrorism (24 per cent) ranks as the second major concern among the Indian consumers even before the 26/11 Mumbai attacks. Indians’ concern about terrorism actually topped the world consumers when the survey was conducted in October. The level of concern about terrorism is expected to heighten in the next survey. Work-life balance figured third on the list of major concerns for 21 per cent Indians.

The other major concerns bothering Indians today also reflect the economic experience at a personal level — one in five is concerned about job security and increasing food prices, while one in 10 is affected by children’s education and/or welfare, increasing utility bills, increasing fuel prices and health. Parents welfare and happiness (13 per cent), sixth highest in the world, is a concern that comes higher than health. Indians also seem more concerned with global warming (9 per cent), where India figured on the top 10 list globally, than political stability (7 per cent), and debt (7 per cent).

The reducing inflation should take care of some of these concerns, if only it begins to percolate down to the ground level. And for the biggest concern, everyone has their hopes pinned on India’s recovery in the second half of 2009.

“Irrespective of global conditions, corporations and consumers in India are aware that their long-term prospects will remain strong” Sonia Pall, Executive director, consumer research, The Nielsen Company

How it was done

Nielsen Global Consumer Confidence Index conducted by The Nielsen Company covers Internet users around the world every six months, representing a global online population of about 1 billion consumers. The survey has been gaining traction since it was launched as an Asia-Pacific initiative about five years ago, before “going global” at the end of 2004. The latest survey, conducted in September-October 2008, polled 26,202 internet users in 52 markets of Europe, Asia-Pacific, North America and West Asia.

Three questions are used to calculate the consumer confidence index. They relate to job prospects in the next 12 months; the state of the respondent’s personal finances in the next 12 months; and, based on the cost of things and the respondent’s personal finances, whether or not it is a good time to buy things he wants and needs.

The scale of answers to all three questions are: Excellent, Good, Not so good and Bad. To calculate the index, each response was given values: Excellent (200), Good (133.3), Not so good (66.6) and Bad (0). Using these values, the average of the three questions was taken for each respondent. The index for each country was calculated by taking the index average for each respondent in that country. An index value of 100 corresponds to an average halfway between “Good” and “Not so good”.