The coronavirus pandemic will continue to wreck household consumption in India all through 2021 and pre-covid levels will be reached only by 2022, a report by The Boston Consulting Group (BCG) said. BCG now expects its 2028 consumption estimate for India to be met only by 2030.
Household consumption, which includes food and grocery, housing and household products, transport and communication, health, and education, will decline 10-12% in FY21, the report, ‘How India Spends, Shops and Saves in the New Reality’, said on Thursday. Household consumption in India has grown 13% every year over the past decade.
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Overall consumption growth is also likely to get delayed by up to two years, the report said. Given the uncertainty around covid, it is difficult to have a clear estimate, but BCG’s model suggests household consumption reaching ₹290-300 trillion by 2030—similar to its initial pre-covid estimates for 2028.
Even though the average annual household income is expected to rise to around ₹7.3 lakh by 2030—nearly 40% higher than it is today—this will still be 7-8% lower than BCG’s pre-covid estimates, underlining the prolonged impact of the virus crisis.
While the economy has gradually picked up since the lockdown was lifted, India has seen millions of workers lose their jobs and its GDP contract for the FY21. The year has seen increased financial uncertainty among households, preventing them from spending freely. This will create impediments for recovery.
“Consumption has been significantly impacted in the very near term and is expected to decline by 10-12% this fiscal. Recovery will hinge upon how covid can be sustainably managed. We estimate it may take 1-2 years to get back to pre-covid trajectory. Four fundamental growth drivers (affluence, awareness, attitude and access) will drive nominal consumption growth at a steady rate of 11% up to 2030," said Abheek Singhi, MD and senior partner, BCG, India.
BCG said the recovery in the rural market, a recent growth driver for several FMCG companies, might be short-lived.
“Trends like the increasing role of rural is likely to be short-term in nature, while the increasing contribution of tier-2 and 3 cities to consumption growth is likely to persist in the long-term," it added.
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December 18, 2020 at 09:10AM
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