MNI India Consumer Report May Insight and data for better decisions

Transcription

1 MNI Consumer Report May 2014 Insight and data for better decisions

2 2 MNI Consumer Report - May 2014 About MNI Indicators Insight and data for better decisions MNI Indicators offers unique macro-economic data and insight to businesses and the investment community. We produce data and intelligence that is unbiased, pertinent and responsive. Our data moves markets. Specialising in business and consumer focused macro-economic reports, we give our customers the ability to make timely and relevant decisions. We strive to provide up-to-date information on business and consumer confidence on the economy. MNI Indicators publishes data on a monthly basis. Our indicators are based on a unique and proprietary methodology and are designed to present an advance picture of the economic landscape as perceived by businesses and consumers every month. Our monthly reports explore attitudes, perspectives and confidence across different countries and regions. They deliver in-depth analysis, highlight changing patterns and how these can affect potential developments in business and consumer activities. Written and researched by Philip Uglow, Chief Economist Shaily Mittal, Economist Release Time Embargoed until 9:45 a.m. Mumbai time June 2, 2014 MNI Indicators Deutsche Börse Group Westferry House 11 Westferry Circus London E14 4HE Tel: +44 (0) info@mni-indicators.com MNI Indicators is part of MNI, a leading provider of news and intelligence. MNI is a wholly owned subsidiary of Deutsche Börse Group, one of the largest worldwide exchange organisations. Copyright 2014 MNI Indicators Deutsche Börse Group. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved.

3 MNI Consumer Report - May MNI Consumer Report - May 2014 Contents 4 Editorial 6 Executive Summary 12 Economic Landscape 16 Indicators 17 MNI Consumer Indicator 24 Personal Finances 27 Current Business Conditions 30 Durable Buying Conditions 31 Employment Outlook 33 Prices Sentiment 36 Interest Rate Expectations Indicator 37 Stock Investment Indicator 41 Real Estate Investment Indicator 44 Car Purchase Indicator 46 Consumer Sentiment - Regions 50 Consumer Sentiment - Income Group 52 What the Panel Said 55 Data Tables 63 Methodology

4 4 Spitzzeile Titel MODIfied ns, disillusioned with the current leadership and desperate for change, have given Narendra Modi a clear mandate. The key question is whether he can deliver on his pledges and live up to such high expectations.

5 MNI Consumer Report - May Few would deny the n government has been heavily criticised for not implementing economic reforms and for an inability to control persistently high inflation, both of which have impeded economic growth and led to a significant dampening of foreign investment. ns, disillusioned with the current leadership and desperate for change, have given Narendra Modi a clear mandate. The key question is whether new Prime Minister, Modi, can deliver on his pledges and live up to such high expectations. s stock market certainly thinks so. It s been sky rocketing during the election period and hit a new record high of 25, on May 16, the day election results were announced. Modi s economic track record is undoubtedly impressive. He s been chief minister of Gujarat, a state with 60 million people, for 12 years. During that time, he s cut red tape, invested heavily in infrastructure and contained corruption. Business and investment have thrived in Gujarat making it an investment hub for international companies. The state now produces a quarter of n exports although accounts for just 5% of the nation s population. Modi has promised to replicate his Gujarat policies across the rest of the country. government, he has power to formulate and execute economic policies, but he will face limitations in some states who are more interested in regional rather than national issues. This is a problem he never had to face in Gujarat. Still, to unleash its potential needs to reform, and Modi seems like the best choice to challenge the current status quo. However, only time will tell whether he can make his style of politics work in a massively diverse country, often resistant to change. Shaily Mittal Economist MNI Indicators Our business survey shows that confidence is on the rise and expectations are running high that the business environment will improve further. Consumers are hopeful that the new government will improve employment conditions and ease price pressures. Many voters perceive Modi as a magician and problem solver, while some also give him the status of a god. Even with a large majority Modi will find his god like powers restricted. As the head of the central

6 6 MNI China Consumer Report - May 2013 Executive Summary Consumer sentiment fell in May to the lowest level since January as consumers were less optimistic about the future.

7 MNI Consumer Report - May Consumer sentiment fell in May to the lowest level since January as consumers were less optimistic about the future. The Consumer Indicator declined to in May, after remaining broadly stable at in April. Consumer confidence fell steadily throughout 2013 as the economy weakened, but gained momentum towards the end of the year. Even so, it is still nearly 2% below the level seen in May a year ago. The survey was conducted before the election results were announced although polls had been clearly pointing to a win by the BJP. The Consumer Indicator declined in seven out of the ten major n cities in May apart from Delhi, Pune and Surat. An improvement in consumer sentiment made Surat the most optimistic city in May while respondents from Hyderabad were the least. The Interest Rates Expectations Indicator declined to the lowest in 10 months after remaining broadly stable in April, as there were growing expectations among consumers that the new government will be successful in easing pressure on prices, a prerequisite for an interest rate cut. The Stock Investment Indicator, which gauges whether it is a good time to invest in the stock market, increased significantly to a series high of in May from in the previous month, as the continued rise in the stock market made many investors better off MNI Consumer Indicator - Components Perceptions about the current state of business deteriorated in May and consumers were less optimistic about future business conditions compared with the previous month. The majority of those who expected business conditions to be better in a year s time cited economic development as the main reason. Many respondents expected business conditions to improve in the hope that the Modi led government will push forward with business friendly policies. 100 Personal Finance: Current Personal Finances: Expected Durable Buying Conditions Business Conditions in 1 Year Business Conditions in 5 Years The Durable Buying Conditions Indicator increased to in May from in April, as the majority of respondents reported that it was a good time or okay time to purchase large household goods. 0 Consumers dissatisfaction with the current level of prices increased in May, while expectations for inflation in a year s time eased to the lowest since July 2013.

8 8 MNI Consumer Report - May 2014 All - Overview Mar-14 Apr-14 May-14 Highest Since Lowest Since 3-Month Average Monthly Change Monthly % Change MNI Consumer Indicator Jan % Current Indicator Mar % Expectations Indicator Jan % Personal Finance: Current Mar % Personal Finance: Expected Oct % Business Condition: 1 Year Jan % Business Condition: 5 Years Jan % Durable Buying Conditions Mar % Current Business Conditions Indicator Mar % Stock Investment Indicator series high % Real Estate Investment Indicator Oct % Car Purchase Indicator Mar % Employment Outlook Indicator Feb % Inflation Expectations Indicator Jul % Current Prices Satisfaction Indicator series low % Interest Rates Expectations Indicator Jul %

9 MNI Consumer Report - May All - Summary May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May MNI Consumer Indicator Current Indicator Expectations Indicator Personal Finance: Current Personal Finance: Expected Business Condition: 1 Year Business Condition: 5 Years Durable Buying Conditions Current Business Conditions Indicator Stock Investment Indicator Investment Return Stock Price Sentiment Stock Market Expectations Real Estate Investment Indicator House Price Expectations House Buying Sentiment House Selling Sentiment Car Purchase Indicator Car Purchase Expectations Price of Gasoline Expectations Employment Outlook Indicator Inflation Expectations Indicator Current Prices Satisfaction Indicator Interest Rates Expectations Indicator

10 10 MNI Consumer Report - May 2014 All - Records 2012-Current Minimum Maximum Mean Median MNI Consumer Indicator Current Indicator Expectations Indicator Personal Finance: Current Personal Finance: Expected Business Condition: 1 Year Business Condition: 5 Years Durable Buying Conditions Current Business Conditions Indicator Stock Investment Indicator Investment Return Stock Price Sentiment Stock Market Expectations Real Estate Investment Indicator House Price Expectations House Buying Sentiment House Selling Sentiment Car Purchase Indicator Car Purchase Expectations Price of Gasoline Expectations Employment Outlook Indicator Inflation Expectations Indicator Current Prices Satisfaction Indicator Interest Rates Expectations Indicator

11 n economy grew by 4.7% in , up from 4.5% recorded in the previous year. This is the first time in 26 years that growth is below 5% for two successive years.

12 12 Spitzzeile Titel Economic Landscape A landslide election victory for Narendra Modi s Bharatiya Janata Party has created euphoria in, driving the stock market to life-time highs and the rupee to its strongest level in nine months.

13 MNI Consumer Report - May A landslide election victory for Narendra Modi s Bharatiya Janata Party has created euphoria in, driving the stock market to life-time highs and the rupee to its strongest level in nine months. The BJP has promised to repair the economy and tackle stubbornly high inflation. Latest economic data from has shown modest improvement, with the current account deficit narrowing due to controls on gold imports. Both industrial production and manufacturing output shrank at a slower pace in March, although remained in negative territory. Consumer price inflation increased to its highest level in three months in April. There are increased fears that a below normal monsoon will put upward pressure on food prices, making it more challenging for the Reserve Bank of to make policy more accommodative and for the government to kick start the economy that grew below 5% in Economic growth remains subdued n economy grew by 4.7% in , slightly above 4.5% growth witnessed a year ago. This is the first time in 26 years that growth is below 5% for two successive years. GDP growth in slowed to 4.6% on the year in the three months to March, down from 4.7% in the previous quarter. It was, though, marginally above the 4.4% rate seen in the same period a year ago. Data on an output basis showed that growth was boosted by agriculture which grew 6.3% on the year, compared with 3.7% in the previous quarter and 1.6% in the same quarter a year earlier. Manufacturing data was disappointing and remained in contraction, declining by 1.4% compared with a contraction of 1.5% in the previous quarter, substantially below the growth of 3% in the same quarter a year earlier. The service sector (including financing, insurance and real estate), grew by 12.4%, down from 14.1% in the previous quarter but up from 11.2% growth seen in January-March quarter a year ago. March Industrial output shrinks at slower pace Industrial production remained in negative territory in March due to declining manufacturing output, especially capital goods. Industrial production shrunk by 0.5% in March following a 1.8% decline in February. Much of the decline was led by weakness in manufacturing output which contracted by 1.2% on the year following a 3.7% fall in February. Twelve out of the 22 industry groups within the manufacturing sector contracted in March, led by a 33.1% fall in Economic Growth Industrial Production 12% % 10% 20% 8% % 6% 4% 2% 0% Q Q Q Q Q Q Q % 5% 0% -5% -10% GDP y/y %, fiscal year Source: Central Statistical Organisation, Industrial Production y/y % (RHS) Industrial Production Source: Central Statistical Organisation,

14 14 MNI Consumer Report - May 2014 Radio, TV and communication equipment & apparatus, followed by 26.1% drop in Office, accounting and computing machinery and 21.5% in Medical, precision & optical instruments, watches and clocks. After increasing 2% on the year in February, mining output contracted by 0.4% in March. Output of consumer durables, a measure of consumer demand, posted the sixteenth consecutive decline, falling 11.8% in March compared with a 9.3% decline in the previous month. Capital goods output, a proxy for investment, fell sharply by 12.5% on the year, compared with a decline of 17.5% in February. Inflation ticks up Consumer price inflation rose at the fastest pace in three months to 8.6% in April compared with 8.3% in March. The rise was driven by an increase in food prices. Food price inflation, which makes up almost half of the basket, increased to 9.8% from 9.2% in the previous month. Core CPI eased to 7.8% from 7.9% in the previous month. Wholesale price inflation declined to a two month low of 5.2% in April from 5.7% in March, helped by a slowdown in fuel price inflation. However, food prices continued to rise in April. Wholesale and Consumer Price Inflation 12% 10% 8% 6% 4% In the coming months, there are additional risks of less-than-normal monsoon rains due to possible El Niño effects, which could have a negative impact on s agricultural output. Repo rate unchanged at 8% The RBI left the key policy rate unchanged at 8% at its first bi-monthly monetary policy of the financial year on April 1. Governor Raghuram Rajan said that the Reserve Bank s policy stance will be firmly focused on keeping the economy on a disinflationary glide path that is intended to hit 8% inflation by January 2015 and 6% by January A central bank panel recently proposed to revamp its policymaking structure by setting a long-term consumer price inflation target of 4%, plus or minus 2%. As inflation remains high, it recommended that the goal should be phased in gradually. Rajan has said that if inflation falls as expected, further policy tightening in the near term is not anticipated. The Reserve Bank of is expected to keep rates on hold at its June policy meeting as it waits to see the impact of monsoons on food prices. Lower fiscal budget deficit The government budget deficit stood at Rs trillion in , or 4.5% of GDP, lower than 4.6 % projected in the revised estimate, mainly on account of curbs on government expenditure. Net tax receipts totalled Rs trillion, below the revised target of Rs trillion, while total expenditure was Rs trillion, below the target of Rs trillion in the interim budget. 2% 0% Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 The government has worked out a fiscal consolidation plan to bring down the fiscal deficit to 3% of GDP in Wholesale Price Inflation* Consumer Price Inflation** Source: *Office of the Economic Advisor,, **MOSPI

15 MNI Consumer Report - May Foreign reserves increase Foreign exchange reserves rose to $313.8 billion in the week ending May 9, from $ billion a week earlier as overseas investors poured money into the stock market. According to the RBI s weekly statistical supplement, foreign currency assets, the biggest component of the forex reserves, rose by $2 billion to $286.6 billion. These are expressed in dollar terms and include the effect of appreciation or depreciation of non-us currencies such as the euro, pound and yen, held in its reserves. Moves by the RBI over recent months have greatly strengthened s foreign exchange reserve position, leaving the country less vulnerable to another run on the currency. The value of s gold reserves remained unchanged at $21 billion. Trade deficit shrinks in April s trade deficit narrowed to $10.1 billion in April compared with $17.7 billion a year ago and a five month high of $10.5 billion in March. Exports increased by 5.3% to $25.6 billion in April, halting two consecutive months in decline. Imports fell 15% on the year to $35.7 billion in April and were almost 11% below the $40 billion recorded in March. Oil imports fell from $15.8 billion in March to $13 billion in April. Gold imports fell significantly by 74.1% from $2.7 billion in March to $1.8 billion in April. The Bharatiya Janata Party, which won the majority in general elections, has promised to ease restrictions on gold imports, saying these curbs had led to smuggling. Narendra Modi has said that any action on gold should take into account the interests of the public and traders, not just economics and policy. deficit as decline in imports was sharper than that in exports owing to stringent gold curbs. In , current account deficit printed at 1.7% of GDP, much lower than 4.7% of GDP in the previous year. Car sales shrink in April Many car makers have launched compact cars to attract price sensitive customers and reduced prices of existing models. In spite of this, car sales decelerated by 10.2% in April, the second consecutive monthly decline and the steepest since a 12.3 % fall in May Many consumers in have chosen to defer purchases of vehicles given the slowdown in the economy, higher loan rates and rising fuel prices. Potential buyers hope that the next government will be successful in taming inflation and introduce friendlier loan policies. According to the Society of n Automobile Manufacturers deputy director general, cuts in excise taxes and vehicle prices have resulted in an increase in customer visits to car showrooms but have not translated into higher purchases. Companies are looking forward to the new government s budget to see if the excise tax cut from 12% to 8% that was announced in the interim budget in February will be continued. The automobile industry is optimistic that sales will increase in 2014 as the economy rebounds and interest rates and inflation stabilise. s current account deficit for the January-March period narrowed sharply to $1.2 billion (0.2% of GDP) from $18.1 billion (3.6% of GDP) in the same period last year, which was also lower than $4.2 billion (0.9% of GDP) in the October-December quarter of The lower current account deficit was primarily on account of a decline in the trade

16 16 MNI China Consumer Report - May 2013 Indicators Consumer sentiment fell in May to the lowest level since January. However, as the new government assumes power, it has promised to kick-start the stalling economy and improve general business conditions.

17 MNI Consumer Report - May MNI Consumer Indicator Lowest Since January Consumer sentiment fell in May to the lowest level since January as consumers were more pessimistic about the future. The Consumer Indicator declined to in May after remaining broadly stable at in April. Consumer confidence fell steadily throughout 2013 as the economy weakened, but gained momentum towards the end of the year. Even so, it is still nearly 2% below the level seen in May a year ago. The survey was conducted before the election results were announced although polls had been clearly pointing to a win by the BJP. The new Modi government has promised to kick-start the stalling economy and improve general business conditions. The Current Indicator, which measures consumers assessment of current conditions, stood at compared with in April. The Expectations Indicator declined to 127.2, after remaining broadly stable at in April. In May, four out of the five components which make up the MNI Consumer Indicator declined. The only component to rise was the Durable Buying Conditions Indicator as the majority of consumers were optimistic about purchasing large household items. Consumers confidence regarding Current Personal Finances remained broadly stable while a growing number of respondents expected their Future Personal Finances to remain the same in a year s time. MNI Consumer Indicator Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Consumer Indicators Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Current Expectations MNI Consumer Indicator May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 MNI Consumer Indicator Current Expectations

18 18 MNI Consumer Report - May 2014 All North Total Indicator Current Indicator Expectations Indicator Total Indicator Current Indicator Expectations Indicator South East Total Indicator Current Indicator Expectations Indicator Total Indicator Current Indicator Expectations Indicator West Central Total Indicator Current Indicator Expectations Indicator Total Indicator Current Indicator Expectations Indicator

19 MNI Consumer Report - May In spite of the latest fall, the majority of respondents expected future business conditions to improve. The less timely quarterly consumer survey from the Reserve Bank of showed that consumers expectations improved significantly in March compared with December, in line with our own survey. Respondents reported lower confidence on spending and a small proportion of respondents felt it was a good time for making outlays for big ticket purchases such as motor vehicles and houses, consistent with our monthly survey. Regions The slight decline in the MNI Consumer Indicator was led by South and East, the latter hitting a record low. Expectations of respondents from East about future Personal Finances and Business Conditions in a year s time fell to a series low. Consumer Indicator: Contribution to Monthly Change (% pt.) Durable Buying Conditions Business Condition: 5 Year Business Condition: 1 Year Personal Finance: Expected Personal Finance: Current Respondents from West were the most optimistic, led by a significant increase in Durable Buying Conditions Indicator. Consumers remained more optimistic about future rather than current conditions. It was only in East, where consumers were almost equally optimistic about current conditions and future expectations. Age Consumer sentiment deteriorated in all age groups, and was the lowest in the oldest age group. The Consumer Indicator for the age range declined to in May from in April. All five components of the Consumer Indicator declined apart from Durable Buying Conditions which remained broadly stable. In spite of a decline, consumers remained highly optimistic about their Personal Finances, both current and expected, while their perceptions about future Business Conditions remained at elevated levels.

20 20 MNI Consumer Report - May 2014 Consumer sentiment among year olds declined to in May from in April, the lowest since September The decline in sentiment was led by the Expectations Indicator, with all three of its components down on the month. Consumers were more optimistic about Current Personal Finances and buying large household items. For the oldest age range, year olds, sentiment declined to the lowest since January to in May compared with in the previous month. The decline was led by the Expectations Indicator which fell to the lowest since December Expected Personal Finances and Business Conditions in One Year, both fell to the lowest since October, while consumers were more optimistic about Business Conditions in Five Years. After a significant fall in April, consumers confidence to buy large household goods increased in May despite lower Current Personal Finances compared with the previous month. Consumer Indicator: Age Groups Total Indicator Income Confidence deteriorated in high income households and remained broadly stable among low income households. The Consumer Indicator for households with an average annual income of over INR 432,000 declined 2.1% on the month to from a series high of in April. For households with an average annual income under INR 432,000, the indicator remained broadly stable at compared with in April. Compared with the previous year, confidence has increased 2.6% among higher income households, while for lower income households it has declined by 1%. On average, though, the level of confidence remains greater for high income households.

21 MNI Consumer Report - May MNI Consumer Indicator Income Groups < INR 432,000 per annum Total Indicator Current Indicator Expectations Indicator > INR 432,000 per annum Total Indicator Current Indicator Expectations Indicator

22 22 MNI Consumer Report - May 2014 MNI Consumer Indicator Main Cities The Consumer Indicator declined in seven out of the ten major n cities in May, apart from Delhi, Pune and Surat. An improvement in consumer sentiment made Surat the most optimistic city in May, while respondents from Hyderabad were the least. In the capital Delhi, consumer sentiment increased for the first time in four months to in May from in the previous month. All five components that make up the Consumer Indicator rose, with consumers being the most optimistic about purchasing a large household good. Respondents expectations about Business Conditions in One Year hit a series high and were also optimistic about Business Conditions in Five Years, which rose for the first time in four months. Personal Finances, both current and expected, also contributed to a brighter consumer confidence. Consumer Indicator - Mumbai Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 In Mumbai, s most populous city, consumer sentiment declined slightly to from in April. Consumers were less optimistic about Business Conditions in a year s time, although there was a rise in confidence regarding longer term expectations about business conditions. There was a small rise in consumers Personal Finances, both current and expected, although fewer thought it was a good time to purchase large household items with the Durable Buying Conditions Indicator dropped to the 100 mark, the lowest since September Consumer Indicator Components - Mumbai Consumer confidence in Bengaluru, the third largest city by population in, declined following sharp movements over the past five months. The Consumer Indicator fell to from in April, led by a significant decline in the Expectations Indicator. Sentiment towards the purchase of household goods improved, while the rest of the components that make up the Consumer Indicator declined. Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Year Durable Buying Conditions In May, consumer sentiment rose the most in Surat, driven by the expectations during the survey period that Narendra Modi would win the elections. The Consumer Indicator increased from in April from in May and was 14.5% above the same period a year earlier.

23 MNI Consumer Report - May Consumer Indicator - Delhi Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Consumer Indicator - Bangaluru Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Consumer Indicator Components - Delhi Consumer Indicator Components - Bangaluru Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Year Durable Buying Conditions Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Year Durable Buying Conditions

24 24 MNI Consumer Report - May 2014 Personal Finances Expected Finances Lowest Since October Consumers confidence regarding their Current Personal Finances remained broadly stable, while a growing number of respondents reported that they expected their Future Personal Finances to be the same in a year s time. Current Personal Finances, which measures whether the financial situation of a household is better, the same or worse than a year ago, stood at compared with in April. Current Personal Finances hit a series low in July 2013, but have subsequently recovered. The majority of respondents reported that their current financial situation remained the same compared with a year ago, and about 44% reported that their financial conditions were better. Out of those who responded that their financial conditions improved, the majority cited better income as the main reason. A growing proportion gave credit to better family expenses for healthier finances. Personal Finances Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Current Expectations Current Financial Situation Compared with 1 Year Ago (% of Households) 0.1% Expected Personal Finances, which measures whether households think their finances will be better in a year s time, declined for the third month in a row to from in April. The percentage of respondents reporting that they expected their financial situation to improve in a year s time fell from 55.2% to 45.5%. The percentage of respondents reporting that they expected their financial situation to remain the same in a year s time increased to 48.6% from 40.3% previously. 47.9% 8.4% 6.3% 37.2% Much Better A Little Better Same A Little Worse Don t know/ No Answer Much Worse Personal Finances May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Current Expectations

25 MNI Consumer Report - May How Households Spend their Money Monthly Household Income Used for Daily Expenses (% of Households) Monthly Household Income Used for Large Loan Repayment (% of Households) 0.4% 2.0% 15.8% 0.2% 2.3% 7.2% 81.8% 90.3% 0% - 29% of Income 50% - 69% of Income 0% of Income 30% - 49% of Income 30% - 49% of Income 70% - 100% of Income 1% - 29% of Income 50% - 100% of Income Monthly Household Income Used for Savings (% of Households) Monthly Household Income Used for Investments (% of Households) 0.4% 14.6% 6.3% 5.4% 38.4% 40.7% 94.2% 0% of Income 30% -49% of Income 0% of Income 30% - 49% of Income 1% - 29% of Income 50% - 100% of Income 1% - 29% of Income 50% - 100% of Income

26 w Economic development of the country should improve business conditions. There was hope among respondents that the Modi led government will push forward with business friendly policies.

27 MNI Consumer Report - May Business Conditions Future Expectations Lowest Since January Perceptions about the current state of business deteriorated in May and consumers were less optimistic about future business conditions compared with the previous month. The Current Business Conditions Indicator, which measures respondents views on the state of business compared with a year earlier, declined slightly to in May from in the previous month. Current business sentiment has declined considerably since the survey started in November 2012, and was 13.5% below the same period a year ago. The proportion of respondents who were positive about business conditions fell from almost 30% to 26%, while the proportion of those who found them just fair increased to 54.2% from 48.6% previously. Respondents who said business conditions were poor or very poor remained in minority at 15.5%. Expectations for Business Conditions in a Year stood at in May compared with in April. Inspite of the fall, the majority of respondents expected business conditions to be better in a year s time. The majority of those who expected business conditions to be better in a year cited economic development as the main reason. Many respondents expected business conditions to improve in the hope that the Modi led government will push forward with business friendly policies. Current Business Conditions Indicator Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Expected Business Conditions: 1 Year and 5 Years Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 1 Year 5 Years Business Conditions May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Current In 1 Year In 5 Years

28 28 MNI Consumer Report - May 2014 Business Conditions in 1 Year Selected Reasons Longer term, Expectations for Business Conditions in Five Years have been on an upward trend since July last year and the decline in May marked the first fall in four months. The indicator declined from April s series high of to in May. Among the major cities surveyed, Surat, which is a large trading centre in Gujarat, was the most optimistic city. Mumbai, the financial capital of, witnessed the largest jump in long term expectations as compared with the previous month. All 31.2% 32.3% 68.8% 67.7% Apr-14 May-14 Better Worse All, Reasons for Better All, Reasons for Worse 46.2% 39.4% 31.3% 27.3% 15.1% 13.2% 7.3% 7.4% 8.8% 3.0% 1.0% Government/Policy Resource/Environment Government/Policy Resource/Environment Econ. Development Social Stability/ Security Econ. Development Social Stability/ Security Income/Employment Events Income/Employment Events

29 MNI Consumer Report - May Business Conditions in 1 Year Regions Business Expectations Business Expectations: Better or Worse? (% of Respondents) % 31.6% 30.4% 27.3% 30.8% 58.3% 68.4% 69.6% 72.7% 69.2% All North South East West Central North South East West Central Better Worse Reasons for Better (% of Respondents) Reasons for Worse (% of Respondents) North South East West Central Government/Policy Resource/Environment Econ. Development Social Stability/ Security Income/Employment Events North South East West Central Government/Policy Resource/Environment Econ. Development Social Stability/ Security Income/Employment Events

30 30 MNI Consumer Report - May 2014 Durable Buying Conditions Highest Since March The Durable Buying Conditions Indicator increased to in May from in April, as the majority of respondents reported that it was a good time or okay time to purchase large household goods. Sentiment on buying conditions fell throughout most of last year, highlighting pressure on consumers disposable income, owing to the weakening of the economy and high inflation. The ground lost in 2013 has still not been regained, with the result in May down almost 9% from the same period a year earlier. Out of the ten largest cities surveyed, respondents from Kolkata were the most optimistic about buying a large household item in May. Compared with the previous month, fewer consumers from Mumbai, Ahmadabad and Chennai thought it was a good time to buy a large household item. The rise in the Durable Buying Conditions Indicator was led by North and West. Respondents from South were the most optimistic about buying durable goods, although fewer respondents as compared with the previous month. Durable Buying Conditions Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Is It a Good or Bad Time to Buy Large Household Goods? (% of Households) 1.1% 18.0% 7.7% 0.8% 35.7% 36.7% Excellent Time Good Time Neutral Bad Time Very Bad Time Don t Know/No Answer Durable Buying Conditions May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Durable Buying Conditions

31 MNI Consumer Report - May Employment Outlook Indicator Highest Since February The Employment Outlook Indicator increased slightly to in May from in April. The indicator measures opinion on the outlook for the employment market over the next 12 months. The Modi government has promised better employment generation especially for the youth. The May reading was below the series average of and almost 9% below the same period a year ago. Respondents from North and West expected an improvement in the employment situation over the next 12 months while those from other regions were less optimistic about the employment outlook. In East, the indicator fell below the 100 expansion/ contraction level as the number of optimistic respondents reduced significantly. Employment Outlook Indicator Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Employment Outlook for the Next 12 Months (% of Households) The proportion of respondents who expected an improvement in the Employment Outlook increased to 42.1% in May while 48.4% expected them to remain the same. Those expecting the employment outlook to worsen declined from 12% to 9.5% in May. 8.7% 0.8% 1.3% 40.8% 48.4% Much Better A Little Better Same A Little Worse Much Worse Don t Know/No Answer Employment Outlook May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Employment Outlook

32 w Expectations for inflation in a year s time eased to the lowest since July A higher proportion of respondents thought prices would remain the same, but of those who thought prices would go up, a growing proportion thought that they would rise up to 10%.

33 MNI Consumer Report - May Prices Sentiment Inflation Expectations Lowest Since July Consumers dissatisfaction with the current level of prices increased in May, while expectations for inflation in a year s time eased to the lowest since July The Current Prices Satisfaction Indicator declined to a new series low of 63.0 in May compared with 66.3 in the previous month. A figure below 100 indicates wider dissatisfaction with the current level of prices. The further below 100, the greater the dissatisfaction. The indicator has trended down since the start of the survey in November 2012 and has been above 100 in only the first two months of the survey. s consumer price inflation rose at the fastest pace in three months to 8.6% in April compared with 8.3% in March. Food price inflation, which makes up almost half of the basket, increased to 9.8% from 9.2% in the previous month. Wholesale price inflation declined to a two month low of 5.2% in April from 5.7% in March, helped by a slowdown in fuel price inflation. The Inflation Expectations Indicator, which measures whether respondents think prices will be higher or lower in 12 months time, declined for the third consecutive month to from in April. Consumers expectations for inflation have remained elevated since November 2012 when the series started. Some respondents expected the new government to help bring down price pressures. Satisfaction with Current Prices Indicator Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Inflation Expectations Indicator Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 The percentage of respondents who believed prices would be higher in a year s time fell from 82.5% to Prices Sentiment May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Satisfaction with Current Prices Inflation Expectations

34 34 MNI Consumer Report - May 2014 Prices Sentiment Regions 75.3%, while those saying prices would be about the same increased to 19.8% from 12.4% in the previous month. A tiny proportion of respondents believed prices would be lower in a year s time. Satisfaction with Current Prices (% of Households) A higher proportion of respondents thought prices would remain the same, but of those who thought prices would go up, a growing proportion thought that prices would rise by up to 10%. 20.5% 0.8% 13.8% Regions Satisfaction with Current Prices worsened significantly in East and West, the latter hitting a series low. North n respondents were the least satisfied with almost three quarters of them saying they were dissatisfied. 48.5% 16.4% Apart from Central and North, more respondents from the other three regions expected prices to fall in a year s time as compared with the previous month. Consumers from the Central region had the highest inflationary expectations since the start of the series in April 2013 and also as compared with the other regions. Very Satisfied Quite Satisfied So So Not Very Satisfied Inflation Expectations in 12 Months (% of Households) Not Satisfied At All Don t Know/No Answer 0.2% 19.8% 4.7% 22.2% 53.1% Much Higher A Little Higher Same A Little Lower Much Lower Don t Know/No Answer

35 MNI Consumer Report - May Inflation Expectations Indicator Inflation Expectations in 12 Months (% of Households) All North South East West Central North South East West Central Much Higher Same Much Lower A Little Higher A Little Lower Don t Know/No Answer Current Prices Satisfaction Indicator Satisfaction with Current Prices (% of Households) All North South East West Central All North South East West Central Very Satisfied Quite Satisfied Neutral Not Very Satisfied Not Satisfied At All Don t Know/No Answer

36 36 MNI Consumer Report - May 2014 Interest Rate Expectations Lowest Since July The Interest Rates Expectations Indicator declined to the lowest in 10 months after remaining broadly stable in April, as there were growing expectations among consumers that the new government will be successful in easing pressure on prices, a prerequisite for an interest rate cut. The indicator declined to in May from in April, although was 3.6% above the outturn recorded in the same period a year ago. Since September 2013, when Raghuram Rajan took over as the Governor of the RBI, interest rates have been hiked three times in order to stabilise the sharp fall of the rupee and control inflation. The RBI left the key policy rate unchanged at 8% at its first bi-monthly monetary policy of the financial year on April 1. Raghuram Rajan said that the Reserve Bank s policy stance will be firmly focused on keeping the economy on a disinflationary glide path and is confident inflation will hit 8% by January 2015 and 6% by January Interest Rate Expectations Indicator Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Expected Change in Interest Rate in 1 Year (% of Households) 0.4% 18.3% 11.6% 4.0% 23.8% 41.9% Much Higher A Little Higher Same A Little Lower Much Lower Don t know/ No Answer Interest Rate Expectations May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Interest Rate Expectations

37 MNI Consumer Report - May Stock Investment Indicator Hits Series High The Stock Investment Indicator, which gauges whether it is a good time to invest in the stock market, increased significantly to a series high of in May from in the previous month, as the continued rise in the stock market made many investors better off. n equities have rallied in recent months boosted by a growing expectation that the new government will help to improve economic growth. The benchmark Sensex hit another all-time high of on May 16 as BJP got a clear mandate in the general elections. The Indicator is made up of three components; Investment Return, Stock Price Sentiment and Stock Market Expectations. Stock Price Sentiment, which measures whether respondents view equity prices as high or low and affects investment negatively, declined for the second time in a row to from in April. Stock Investment Indicator Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Stock Investment Indicator: Contribution to Monthly Change (% pt.) The Stock Investment Return component increased sharply to in May from in April. The proportion of respondents who made a loss in the last year reduced drastically to just 5.4% from 25.7% in April and 50.1% in March while those who made a profit increased to 66.5% from 53.7% in April Stock Market Expectations Stock Price Sentiment Expectations for the stock market in three months time declined for the first time in four months to in May from in April, as the majority of respondents expected equity prices to go up Investment Return Investment Sentiment May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Investment Sentiment Indicator Investment Return Stock Price Sentiment Stock Market Expectation

38 38 MNI Consumer Report - May 2014 Stock Investment Indicator Regions and Components Stock Investment Indicator - Components Investment Return Stock Investment Indicator Investment Return Stock Price Sentiment Stock Market Expectations Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Stock Price Sentiment Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Stock Market Expectations Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-1

39 The Stock Investment Indicator rose to a series high in May. Both foreign and local investors have been investing in stocks in the hope that new government s reforms will revive the n economy.

40 w The Real Estate Investment Indicator declined for the third consecutive month in May. However, consumers remained optimistic and expected a reduction in home loans.

41 MNI Consumer Report - May Real Estate Investment Indicator Third Consecutive Decline The Real Estate Investment Indicator, which gauges whether it is a good time to invest in the housing market, declined for the third consecutive month in May having risen close to the series high in February. The indicator fell to in May from in April. The three month trend has followed a sharp V-curve and May s dip marked the first fall in seven months. The Real Estate Investment Indicator is composed of three sub-indicators to gauge sentiment on the housing market; House Price Expectations, House Buying Sentiment and House Selling Sentiment. House Buying Sentiment picked up slightly in May to from in April, following two consecutive declines. 35.8% of the respondents said it was an excellent or a good time to buy a house. Modi has promised to implement an affordable housing policy. Consumers are optimistic and expect a reduction in home loans, the implementation of the proposed GST framework and its implied tax benefits. Real Estate Investment Indicator Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Real Estate Investment Indicator: Contribution to Monthly Change (% pt.) Since May 2013, increasingly more consumers have expected prices to rise in the next six months. After hitting a series high in February, the House Price Expectations component has eased, and in May it stood at 139.8, down from in April. The proportion of respondents who thought house prices would rise in the next six months declined from 71.4% in April to 63.1% in May House Selling Sentiment House Buying Sentiment Price Expectations Real Estate Investment Sentiment May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Real Estate Investment Sentiment Price Expectations House Buying House Selling

42 42 MNI Consumer Report - May 2014 Real Estate Investment Indicator Components and Balances The House Selling Sentiment component, which has a negative impact on the Real Estate Investment Indicator, increased for the second time in a row to in May from in the previous month. Real Estate Investment Indicator - Components Regions The Real Estate Investment Indicator fell in all regions apart from South where a rise in House Buying Sentiment led the rise. Respondents in the other regions (North, East, West and Central ) were less optimistic about real estate investment Real Estate Investment Indicator House Buying Sentiment House Selling Sentiment House Price Expectations April 2014 May 2014 Real Estate Prices: Expected Changes in Next 6 Months Expected Changes in Real Estate Prices in the Next 6 months (% of Households) Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 All North South East West Central Go Up Dramatically Go Up Slightly Stay the Same Gow Down Slightly Go Down Sharply Don t Know/No Answer

43 MNI Consumer Report - May House Buying Sentiment Reasons for Buying Houses (% of Households) % 3.9% 4.6% % % % 80 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Prices Income/Purchasing Power Investment Value Policy/Interest Rate Supply and Quality Others House Selling Sentiment Timing for Selling Houses (% of Households) 2.1% 9.9% 1.9% % 32.1% Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May % Excellent Time Good Time Neutral Bad Time Very Bad Time Don t Know/No Answer

44 44 MNI Consumer Report - May 2014 Car Purchase Indicator Lower Expectations for Gasoline Prices 75.2 The Car Purchase Indicator rose in May as consumers expectations for gasoline prices declined to the lowest in 15 months, while their perceptions about the timing for buying a car remained broadly stable. The indicator rose to 75.2 in May from 71.7 in April. Many car makers have reduced prices of existing models and launched compact cars to attract price sensitive customers. In spite of this, car sales decelerated by 10.2% in April, according to the Society of n Automobile Manufacturers. Consumers have chosen to defer purchases of vehicles given the slowdown in the economy, higher loan rates and rising fuel prices. Potential buyers hope that the new government will be successful in taming inflation and introduce friendlier loan policies. Car Purchase Indicator Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 The Car Purchase Expectations component, which gauges whether consumers believe it is a good or bad time to purchase a car over the next 12 months, remained broadly stable after declining to an eight month low in April. The component stood at in May compared with in April. Of those who thought it would be a good time to buy a car, the majority continued to cite higher purchasing power as the main reason, although a growing proportion thought it would be a good investment value. The Indicator on Gasoline Prices, which measures expectations for the price of gasoline in a year, declined to the lowest since February 2013, to in May compared with in April. Car Purchase Indicator - Components Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Car Purchase Expectations Price of Gasoline Car Purchase Sentiment May-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Car Purchase Sentiment Car Purchase Expectations Price of Gasoline

45 MNI Consumer Report - May Car Purchase Indicator Regions Reasons for a Good Time to Buy a Car (% of Households) Reasons for a Bad Time to Buy a Car (% of Households) All North South East West Central All North South East West Central Prices Policy/Interest Rate Cost of Use/Upkeep Prices Policy/Interest Rate Cost of Use/Upkeep Income/Purchasing Power Supply and Quality Others Income/Purchasing Power Supply and Quality Others Is it a Good Time to Buy a Car? (% of Households) Car Purchase Expectations - Regions 0.5% % 1.5% 28.0% % 32.1% All North South East West Central Excellent Good Time Neutral Bad Time Very Bad Time Don t Know/No Answer

46 46 MNI Consumer Report - May 2014 MNI Consumer Indicator Regions Consumer Indicator: North Consumer Indicator Components: North Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Years Durable Buying Conditions Consumer Indicator: South 140 Consumer Indicator Components: South Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Years Durable Buying Conditions

47 MNI Consumer Report - May Consumer Indicator: East Consumer Indicator Components: East Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Years Durable Buying Conditions Consumer Indicator: West Consumer Indicator Components: West Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Years Durable Buying Conditions

48 48 MNI Consumer Report - May 2014 Consumer Indicator: Central Employment Outlook for the Next 12 Months (% of Households) Jun-13 Sep-13 Dec-13 Mar-14 North South East West Central Much Better A Little Better About the Same A Little Worse Much Worse Don t Know/No Answer Consumer Indicator Components: Central Interest Rate Expectations on House and Car Loans Indicator Current Indicator Expectations Indicator Personal Finances: Current Personal Finances: Expected Business Conditions: 1 Year Business Conditions: 5 Years Durable Buying Conditions North South East West Central

49 MNI Consumer Report - May Is it a Good/Bad Time to Buy Large Household Goods? (% of Households) All North South East West Central Excellent Time Good Time Neutral Bad Time Very Bad Time Don t Know/No Answer Car Purchase Indicator - Regions Interest Rates Expectations (% of Households) All North South East West Central All North South East West Central Much Higher A Little HIgher About the Same A Little Lower Much Lower Don t Know/No Answer

50 50 MNI Consumer Report - May 2014 MNI Consumer Indicator Income Groups < INR 432,000 per annum < INR 432,000 - Components Total Indicator Current Indicator Expectations Indicator April 2014 Personal Finances: Current Personal Finances: Expected Business Business Conditions: 1 Conditions: 5 Year Years Durable Buying Conditions May 2014 > INR 432,000 per annum > INR 432,000 - Components Total Indicator Current Indicator Expectations Indicator April 2014 Personal Finances: Current Personal Finances: Expected Business Business Conditions: 1 Conditions: 5 Year Years Durable Buying Conditions May 2014

51 Confidence deteriorated in high income households in May. On average, though, the level of confidence remains greater for high income households as compared with low income households.

52 52 Spitzzeile Titel What the Panel Said A selection of comments from the panel of consumers surveyed over the past month.

53 MNI Consumer Report - May In Surat, the property rates are high but in nearby areas they are less. Business conditions will improve only if new government encourages upcoming entrepreneurs. There are a lot of new shops due to competition so a customer can purchase goods at reseaonable price. Taxes on electronic goods has been reduced. Public in Gujarat are enthusiastic. Investments here are comparatively more compared with other states. It is not a good time to buy consumer durables and people should wait until the festival season. There is a variety of cars in market, so it ll be good time for people to buy a car. Economic conditions will be better if Modi government comes in power. Gasoline prices depend upon the international market, rupee dollar fluctuations & crude prices. It is better to buy consumer durables online. It is best to buy households goods during Diwali time because large discounts are available. Building material cost is very high so prices of houses will go up. There is no resale value for electronic items. Because of the poor conditions of business and employment in Muzzafarnagar, it ll be bad time for people to buy a house here. If Narendra Modi govt comes to power, things will improve. Nowadays everybody carries a mobile phone as buying capacity has increased. There is a hope that if Modi government comes to power, prices will be reduced. Employment conditions are poor. To own a car is considered as a status symbol.

54 w Economic conditions will be better if Modi government comes to power......a general belief among many respondents.

55 Spitzzeile Titel 55 Data Tables A closer look at the data from the May consumer survey.