OBJECTIVE OF THE STUDYTo study the changing consumer confidence index worldwide during the recession period and

post recession and their spending habits in various categories.

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NEED FOR THE STUDY

Consumer confidence index is a tool to measure how the different consumers are feeling of the current economic situations. Consumer confidence index defines the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. The study of consumer confidence index serves as a decision making tool for manufacturers, retailers, banks and the government.

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Limitations of the study- The study conducted for the preparation of the project is
based on the data published by Central Statistical Organisation, Government of India. The project work requires detail information of various consumer related data from various countries as well as different states of the country. Only the data published on government website are used to conduct the research study. Moreover very little information is available on consumer confidence report on India. Time is another constraint due to which adequate amount of data cannot be collected for the completion of the study. Apart from time, the project focuses on the survey of confidence index of consumers during economic downturn period of 2007-2010, so the project work is only carried out on the past data.

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RESEARCH METHODOLGYThe research methodology for the project work is based on the qualitative analysis of data published by Central Statistical Organisation, of India and AC NIELSEN global consumer confidence index report during the recession period 2007-2010. RESEARCH DESIGN- Research design is made in a way to understand consumer spending during the recession period and consumer sentiments associated with market and government. Research design consists of both primary data and secondary data to understand the effect of recession during global turndown period of 2007-2010 and consumer behaviour during the post recession period. PRIMARY DATA- It is the data collected through interaction with consumers to get a firsthand experience of the consumers in the market. Primary data has been collected for the project to understand consumer spending patterns, cost cutting methodology used and monthly budget on various commodities. SECONDARY DATA- Data collected from other source which includes published reports, articles in newspaper, internet to understand associated terminology for the project work. Secondary data has been collected for this project work from Central Statistical Organisation and AC NIELSEN global consumer confidence report to understand global consumer spending habits and customer spending habits in a post recession period.

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PREFACE- Today, India is much more integrated with the world economy through both the

current and capital accounts. The down turn that appears to have begun in the USA in September, 2008 have some negative impact on Indian economy. The most immediate effect of this global financial crisis on India is an outflow of foreign institutional investment (FII) from the equity market. This withdrawal by the FIIs led to a steep depreciation of the rupee. The banking and non banking financial institutions have been suffering losses. The recession generated the financial crisis in USA and other developed economies have adversely affected Indias export of software and IT services. For fighting this crisis, government of India responded through its monetary policy by pumping the liquidity into the system rather than using effective fiscal policy i.e. public expenditure and investment to face the recession. No doubt, government has introduced three fiscal stimulus packages for stimulating demand in the economy but it was not sufficient, the larger government expenditure should be oriented towards agriculture and infrastructure. Although India has revived to high growth, this new growth should have to come from some new speculative bubble but from enlarged government expenditure that directly improves the livelihood of the people. The present paper is an attempt to understand the economic scenario and the consumer confidence during the economic downturn.

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RECESSION- In economics, a recession is a business cycle contraction, a general slowdown in

economic activity. Macroeconomic indicators such as GDP, employment, investment, spending, capacity utilization, household income, business profits and inflation fall, while bankruptcies and unemployment rate rise. Recessions generally occur when there is a widespread drop in spending, often following an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation. ATTRIBUTES
A recession has many attributes that can occur simultaneously and includes declines in component measures of economic activity (GDP) such as consumption, investment, government spending, and net export activity. These summary measures reflect underlying drivers such as employment levels and skills, household savings rates, corporate investment decisions, interest rates, demographics, and government policies. Economist Richard C. Koo wrote that under ideal conditions, a country's economy should have the household sector as net savers and the corporate sector as net borrowers, with the government budget nearly balanced and net exports near zero. When these relationships become imbalanced, recession can develop within the country or create pressure for recession in another country. Policy responses are often designed to drive the economy back towards this ideal state of balance. A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression, although some argue that their causes and cures can be different. As an informal shorthand, economists sometimes refer to different recession shapes, such as V-shaped, U-shaped, L-shaped and Wshaped recessions.

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Type of recession or shape v- Shaped recession

The Recession of 1953 in the United States is a classic V-shape.

Preceding Period in Real Gross Domestic Product (annualized; seasonally adjusted); 19472009

Percent Change From Average GDP growth

In a V-shaped recession, the economy suffers a sharp but brief period of economic decline with a clearly defined trough, followed by a strong recovery. V-shapes are the normal shape for recession: "There is a strong historical snap back relationship between the strength of economic recovery and the severity of the preceding recession. Thus, recessions and their recoveries have a tendency to trace out a V shape.

U-Shaped recession

Percent Change From Preceding Period in Real Gross Domestic Product (annualized; seasonally adjusted); growth 19472009

Average GDP

A U-shaped recession is longer than a V-shaped recession, and has a less-clearly defined trough. GDP may shrink for several quarters, and only slowly return to trend
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growth. Simon Johnson, former chief economist for the International Monetary Fund, says a U-shaped recession is like a bathtub: "You go in. You stay in. The sides are slippery. You know, maybe there's some bumpy stuff in the bottom, but you don't come out of the bathtub for a long time." The 197375 recession can be considered a U-shaped recession. In early 1973 the economy began to shrink and continued to decline or have very low growth for nearly two years. After bumping along the bottom, the economy climbed back to recovery in 1975.

W-Shaped recession

The early 1980s recession in the United States is sometimes given as an example of a W-shaped recession.
Percent Change From Preceding Period in Real Gross Domestic Product (annualized; seasonally adjusted); growth 19472009 Average GDP

A W-shaped recession, occurs when the economy has a recession, emerges from the recession with a short period of growth, but quickly falls back into recession. The early 1980s recession in the United States is cited as an example of a W-shaped recession.[4] The National Bureau of Economic Research considers two recessions to have occurred in the early 1980s.[5] The economy fell into recession from January 1980 to July 1980, shrinking at an 8 percent annual rate from April to June 1980. The economy then entered a quick period of growth, and in the first three months of 1981 grew at an 8.4 percent annual rate. As the Federal Reserve under Paul Volcker raised interest rates to fight inflation, the economy dipped back into recession (hence, the "double dip") from July 1981 to November 1982. The economy then entered a period of mostly robust growth for the rest of the decade.

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L-shaped recession

The Japanese asset price bubble led to a Lost Decade in Japan; this period has been characterized as an Lshaped recovery.
Percent Change From Preceding Year in Real Gross Domestic Product; Average GDP growth 19502000

An L-shaped recession occurs when an economy has a severe recession and does not return to trend line growth for many years, if ever. The steep drop, followed by a flat line makes the shape of an L. This is the most severe of the different shapes of recession. Alternative terms for long periods of underperformance include "depression" and lost decade. A classic example of an L-shaped recession occurred in Japan following the bursting of the Japanese asset price bubble in 1990. From the end of World War II throughout the 1980s, Japan's economy was growing robustly. In the late 1980s a massive asset-price bubble developed in Japan. After the bubble burst the economy suffered from deflation, and experienced years of sluggish growth; never returning to the higher growth Japan experienced from 1950-1990. Because the late-2000s recession in the United States followed a similar economic bubble (the United States housing bubble) some economists fear the U.S. economy could enter a prolonged period of low growth even after recovering from the recession.

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Psychological aspects
Recessions have psychological and confidence aspects. For example, if the expectation develops that economic activity will slow, firms may decide to reduce employment levels and save money rather than invest. Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession. Consumer confidence is one measure used to evaluate economic sentiment. The term animal spirits has been used to describe the psychological factors underlying economic activity. Economist Robert J. Shiller wrote that the term "...refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people.

Balance sheet recession

The bursting of a real estate or financial asset price bubble can cause a recession. For example, economist Richard Koo wrote that Japan's "Great Recession" that began in 1990 was a "balance sheet recession." It was triggered by a collapse in land and stock prices, which caused Japanese firms to have negative equity, meaning their assets were worth less than their liabilities. Despite zero interest rates and expansion of the money supply to encourage borrowing, Japanese corporations in aggregate opted to pay down their debts from their own business earnings rather than borrow to invest as firms typically do. Corporate investment, a key demand component of GDP, fell enormously (22% of GDP) between 1990 and its peak decline in 2003.

Liquidity trap
A liquidity trap is a Keynesian theory that a situation can develop in which interest rates reach near zero (ZIRP) yet do not effectively stimulate the economy. In theory, near-zero interest rates should encourage firms and consumers to borrow and spend. However, if too many individuals or corporations focus on saving or paying down debt rather than spending, lower interest rates have less effect on investment and consumption behaviour; the lower interest rates are like "pushing on a string." Economist Paul Krugman described the U.S. 2009 recession and Japan's lost decade as liquidity traps. One remedy to a liquidity trap is expanding the money supply via quantitative easing or other techniques in which money is effectively printed to purchase assets, thereby creating inflationary expectations that cause savers to begin spending again. Government stimulus spending and mercantilist policies to stimulate exports and reduce imports are other techniques to stimulate demand. He estimated in March 2010 that developed countries representing 70% of the world's GDP were caught in a liquidity trap. 10 | P a g e

Predictors
Although there are no completely reliable predictors, the following are regarded to be possible predictors.

Inverted yield curve the model developed by economist Jonathan H. Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate. Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator;

The three-month change in the unemployment rate and initial jobless claims. Lowering of asset prices, such as homes and financial assets, or high personal and corporate debt levels.

Impacts

Unemployment
The full impact of a recession on employment may not be felt for several quarters. Research in Britain shows that low-skilled, low-educated workers and the young are most vulnerable to unemployment in a downturn. After recessions in Britain in the 1980s and 1990s, it took five years for unemployment to fall back to its original levels. Many companies often expect employment discrimination claims to rise during a recession.

Business
Productivity tends to fall in the early stages of a recession, and then rises again as weaker firms close. The variation in profitability between firms rises sharply. Recessions have also provided opportunities for anti-competitive mergers, with a negative impact on the wider economy: the suspension of competition policy in the United States in the 1930s may have extended the Great Depression.

Social effects
The living standards of people dependent on wages and salaries are more affected by recessions than those who rely on fixed incomes orwelfare benefits. The loss of a job is known to have a negative impact on the stability of families, and individuals' health and wellbeing. 11 | P a g e

INTRODUCTION TO THE INDIAN ECONOMY

In the era of globalization financial crisis seems to have been occurring with greater

frequency. The crises of Latin America in the early 1980s and Mexico, Asia and Russia in the 1990s were the four major crises. The fifth one is the recent global financial crisis. Ten year ago, financial crisis of the East Asia was due to a real estate bubble in the Thailand burst, triggering the flight of international speculative capital, today, it is fallout of the real estate crisis in the USA which threatens the financial markets. The global financial crisis of 2008-09 emerged in September 2008 with the failure merger of several large United States based financial firms and spread with the insolvency of additional companies, governments in Europe, recession and declining stock market prices around the globe. But the financial crisis really started to show its effects in the middle of 2007. Around the world, stock markets have fallen, large financial institutions have collapsed or been bought out and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. The crisis has become one of the most radical reshaping of the global banking sector, as governments and the private sector battle to share up the financial system following the disappearance of Lehman Brothers and Merrill as independent entities. Actually, the collapse of Lehman Brothers was a symbol of the global financial crisis. The real sector in many countries was already feeling the effects. Many industrialized nations were sliding into recession. The crisis became so severe that after the failure and buyouts of major institutions, the Bush administrations offered a $700billion bailout plan for the US financial system. Market liberalization and privatization in the commodity sector have also not resulted in greater stability of international commodity prices. There is wide spread dissatisfaction with the outcomes of unregulated financial and commodity markets, which fail to transmit reliable price signals for commodity producers. For the developing countries like India, the rise in food prices as well as the knock on effects from the financial instability and uncertainty in the industrialized nations, are having compounding effect. High fuel costs, soaring commodity prices together with fears of global recession are warning many analysts. The impact of the global crisis has been transmitted to the Indian economy through three distinct channels, namely: the financial sector, exports and exchange rates. The other significant channel of impact is the fall in business and consumer confidence leading to decrease in investment and consumer demand. The Indian government, to boost the demand, has announced several stimulus packages.

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IMPACT OF THE GLOBAL MELTDOWN ON INDIAN ECONOMY

The Indian economy has shown negative impact of the recent global financial meltdown. Though the public sector in India, including nationalized banks could somehow insulate the injurious effects of globalization as we are also part of the globalization strategy of neo-liberalization, there is a limit of our ability to resist global recession, which may change into a great depression. The impact of the crisis was significantly different for the Indian economy as opposed to the western developed nations. Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 GDP (at 2004-05 Price) 3254216 3566011 3898958 4162509 4493743 4879232 Growth in % 9.5 9.6 9.3 6.8 8.0 8.6

TABLE-1 TRENDS IN GDP AT FACTOR COST PRICE IN RS CRORE

Fig1 Trends in GDP (growth rate in %)

After a long spell of growth, the Indian economy was experiencing a down turn. Table (I) shows that n 2006-07 the GDP growth rate was 9.6% which became 9.3% in 2007-08 and due to the impact of recent global financial crisis and global recession, the growth rate of Indian economy became 13 | P a g e

declining. In 2008-09, it reduced to 6.8%. The International Monetary Fund (IMF) had also projected the growth prospects for Indian economy to 5.1 % in next year. And the RBI annual policy statement 2009 presented on July 28, 2009, projected GDP growth at 6 % for 2009-10. This declining trend has affected adversely the industrial activity, especially, in the manufacturing, infrastructure and in service sectors mainly in the construction, transport and communication, trade, hotels etc. Service export growth was also likely to slow as the recession deepens and financial services firms, traditionally large users of out-sourcing services were restructured. The financial crisis in the advanced economies and likely to slow down in developing economies could have adverse impact on the IT sector. About 15 to 18 percent of the business coming to Indian out-sources includes projects from banking, insurance and the financial services sector which was uncertain at that time. A financial crisis could cause workers earnings to fall as jobs were lost in formal sector demand for services provided by the informal sector declined and working hours and real wages were cut. When formal sector workers who have lost their jobs entered the informal sector, they put additional pressure on informal LABOUR markets. During recession industrial growth was also faltering. Indias industrial sector has suffered from the depressed demand conditions in its export markets, as well as from suppressed domestic demand due to the slow generation of employment. As per the index of industrial production (IIP) data released by CSO, the overall growth in 2008-2009 was 3.2 percent compared to a growth of 8.7 percent in 2007-08. The recent crash in the Sensex was not simply an indicator of the impact of international contagion. There have been warning signals and signs of fragility in Indian finance during that time and those were likely to be compounded by trends in real economy. The most immediate effect of that crisis on India has been an outflow of foreign institutional investment from the equity market. Foreign Institutional Investment (FIIs), which need to retrench assets in order to cover losses in their home countries and were seeking havens of safety in an uncertain environment, have become major sellers in Indian markets. As FIIs pull out their money from the stock market, the large corporate no doubt have affected, the worst affected was likely to be the exports and small and marginal enterprises that contribute significantly to employment generation.

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Year 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09* *April-nov2008-09

Amount 2339 2160 1846 562 9949 10272 9332 6707 16040 -8857

Table-2 USNET INVESTMENT OF FIIS AT MONTHLY EXCHANGE RATE (IN $ MILLION)

Fig 2 Net Investment of FIIs (At monthly Exchange Rate)

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In 2007-08, net Foreign Institutional Investments (FIIs) inflows into India amounted to $16040 million. But in April-November 2008 it was negative to $8857 million. Due to this, there was a collapse in stock prices. As a result, the Sensex fell from its closing peak of 20873 on January 2008 to nearly 8000 in October-November 2008.

Fig 3 Daily movements of BSE Sensex in 2008-09 Source: Bombay Stock Exchange, India The foreign exchange market came under pressure because of reversal of capital flows as part of the global decelerating process. Foreign exchange reserves were depleting. It was $ 309.7 billion in 2007-08 and came down to $252.0 billion in 2008-09, which shows the direct impact of the financial crisis on India's foreign exchange reserves.

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Fig 4 Foreign Exchange reserve (in US $ billion)

The shrinking of aggregate in the world market as a consequence of the crisis has hurt the exporting manufacturing industries in the country. Table (3) shows that in 2007-08, Indias export and import were $162904 million and $251439 million respectively and balance of payment was $ -88535 million. And in 2008-09, export and import were $185295 million and $303696 million respectively. The balance of payment was $ -118401 million. The growth rate of export and import also declined to 13.3 percent and 20.7 percent from 29.0 and 35.5 percent respectively during that period. In 2009-10 the export and import further declined very much to $178751 million and $288373 million respectively. In 2009-10 the export growth rate was -3.5 percent and import growth rate was -5.0 percent. The balance of payment was $ -109622. This shows that Indias exports are adversely affected by the slowdown in global markets. This is already evident in certain industries like the garments industries where there have been significant job losses with the onset of the crisis. This along with a squeeze in the high-income service sectors like financial services, hospitality and tourism etc. led to a reduction in consumption spending and overall demand with the domestic economy. A direct consequence of this was a simultaneous loss of informal employment and lower generation of new non-farm employment in the economy. The depreciation of rupee could not positively affect the exports bill of India.

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Year

Export (%growth)

Import (%growth)

Balance of Trade

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11*

103091(23.4) 126414(22.6) 162904(29.0) 185295(13.3) 178751(-3.1) 105064(29.5)

149166(33.8) 185735(24.5) 251439(35.5) 3036896(20.7) 288373(-5.0) 161051(19.0)

-46075 -59321 -88535 -118401 -109622 -55987

*Data for 2010-11 are provisional Source DGCI&S, Kolkata,India

s Fig 5 Trends of Indias Export and Import

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RESPONSE OF GOVERNMENT AND RBI

The contagion from the global financial crisis required appropriate monetary and fiscal policy responses to ensure enough liquidity in the economy, the orderly functioning of markets, and the financial stability. The government of India and RBI responded to the challenge strongly through its fiscal and monetary policies. The government has introduced three fiscal stimulus packages. These are expanded safety- net programme for the rural poor, the farm loan waiver package and payout following the Sixth Pay Commission report for stimulating demand in the economy. On the other hand in aftermath of the turmoil caused by bankruptcy, the Reserve Bank has announced a series of measures to facilitate orderly operation of financial markets and to ensure financial stability, which predominantly includes extension of additional liquidity support to banks. The RBI has been effectively able to manage domestic liquidity and monetary conditions consistent with its monetary policy. This has been enabled by the appropriate use of a range of instruments available for liquidity management with the Reserve Bank such as the Cash Reserve Ratio (CRR), which was reduced to 5% in July 2009 from 9% in August 2008 and Statutory Liquidity Ratio (SLR) stipulation and Open Market Operations (OMO) including the Market Stabilization Scheme (MSS) and Liquidity Adjustment Facility (LAF). Reduction in the repo rate (the rate at which RBI lends to the banks) from 9% as on October 2008 to 4.75% in July 2009 and the reverse repo-rate (RBIs borrowing rate) reduced to 3.25% in July 2009 from 6% as on October 2008 in order to improve the flow of credit to productive sectors at viable costs so as to sustain the growth. Further-more, money market liquidity is also impacted by our operation in the foreign exchange market, which in turn, reflects the evolving capital flows. The existing set of monetary instruments has thus, provided adequate flexibility to manage the evolving situation. So the financial sector has emerged without much damage thanks in part of our strong regulatory framework and in part on account of most of the nationalized banking sector.s

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CONSUMER CONFIDENCE INDEX- Consumer Confidence Index (CCI) is an indicator

designed to measure consumer confidence which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. Global consumer confidence is not measured. Country by country analysis indicates huge variance around the globe. The Consumer Confidence Index was started in 1967 and is benchmarked to 1985=100. This year was chosen because it was neither a peak nor a trough. The index is calculated each month on the basis of a household survey of consumers opinion on current conditions and future expectation of the economy. Opinions on current condition make up 40% of the index with expectations of future conditions comprising the remaining 60%.

CALCULATION
In simple terms, increased consumer confidence indicates economic growth in which consumers are spending money, indicating higher consumption. Decreasing consumer confidence implies slowing economic growth, and so consumers are likely to decrease their spending. The idea is that the more confident people feel about the economy and their jobs and incomes, the more likely they are to make purchases. Declining consumer confidence is a sign of slowing economic growth and may indicate that the economy is headed into trouble. Each month The Conference Board surveys 5,000 households. The survey consists of five questions that ask the respondents' opinions about the following: 1. Current business conditions 2. Business conditions for the next six months 3. Current employment conditions 4. Employment conditions for the next six months 5. Total family income for the next six months Survey participants are asked to answer each question as "positive", "negative" or "neutral". Once the data have been gathered, a proportion known as the "relative value" is calculated for each question separately. Each question's positive responses are divided by the sum of its positive and negative responses. The relative value for each question is then compared against each relative value from 1985. This comparison of the relative values results in an "index value" for each question. 20 | P a g e

The index values for all five questions are then averaged together to form the Consumer Confidence Index; the average of index values for questions one and three form the Present Situation Index, and the average of index values for questions two, four and five form the Expectations Index.

HOW IT IS USED
Manufacturers, retailers, banks and the government monitor changes in the CCI in order to factor in the data in their decision-making processes. While index changes of less than 5% are often dismissed as inconsequential, moves of 5% or more often indicate a change in the direction of the economy. A month-on-month decreasing trend suggests consumers have a negative outlook on their ability to secure and retain good jobs. Thus, manufacturers may expect consumers to avoid retail purchases, particularly large-ticket items that require financing. Manufacturers may pare down inventories to reduce overhead and/or delay investing in new projects and facilities. Likewise, banks can anticipate a decrease in lending activity, mortgage applications and credit card use. When faced with a down-trending index, the government has a variety of options, such as issuing a tax rebate or taking other fiscal or monetary action to stimulate the economy. Conversely, a rising trend in consumer confidence indicates improvements in consumer buying patterns. Manufacturers can increase production and hiring. Banks can expect increased demand for credit. Builders can prepare for a rise in home construction and government can anticipate improved tax revenues based on the increase in consumer spending.

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CONSUMER CONFIDENCE INDEX WORLWIDE

CONSUMERS IN A POST RECESSION WORLD Hopes for a full economic recovery accelerated in 26 out of 28 major global markets in the 2nd Quarter of 2009 according to the latest Nielsen Global Consumer Confidence Index conducted in late June 2009. Driven by renewed consumer optimism and stock market gains in BRIC and key Asian markets, the Nielsen Global Consumer Confidence Index rose five Index points to 82 from 77. In addition, the number of consumers and countries who believe their economy is currently in recession declined six Index points in the last three months, with the most positive feelings of recovery emanating from the BRIC and Asian markets. In the last few months, consumers and market sentiment has switched from recession to recovery signaling a major turning point for the Global Financial Crisis.

CONSUMER CONFIDENCE INDEX 2009

120 100
80 60 march 40 20 0
ID IN PH BR AU CN AE CA NZ SG MY TH PL RU AR ZA US HK ES IT DE GB TW TR FR JP KO GLOBAL

june

Country abbreviation
AE United Arab Emirates AR Argentina AT Austria AU Australia BE Belgium BR Brazil CA Canada CH Switzerland CL Chile CN China CO Colombia CZ Czech Republic DE Germany DK Denmark EE Estonia EG Egypt ES Spain FI Finland FR France GB United Kingdom GR Greece HK Hong Kong HU Hungary ID Indonesia IE Ireland IL Israel IN India IT Italy JP Japan KO South Korea LT Lithuania LV Latvia MX Mexico MY Malaysia NL Netherlands NO Norway NZ New Zealand PH Philippines PK Pakistan PL Poland PT Portugal RO Romania RU Russia SA Saudi Arabia SE Sweden SG Singapore TH Thailand TR Turkey TW Taiwan US United States VE Venezuela VN Vietnam ZA South Africa

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CAUTIOUS CONSUMERS Many consumers plan to hold on to their thrifty recessionary habits in the post- recession world. The severity of this recession has brought about a change in consumer values, spending habits and lifestyle choices in many parts of the world, with some indication that consumers in the West will continue to refrain from excessive or unnecessary spending across all aspects of their lifestyles - at least in the short term. Many consumers who cut back on new clothes, out-of-home entertainment and take-away meals and switched to cheaper grocery brands to make ends meet plan to stick to these new habits even when economic conditions improve. Even though consumer confidence is returning in most countries, the tactics and cutbacks that consumers adopted for the recession may be here to stay for many Europeans, Pacific and American consumers. Forty eight percent of Americans say they will continue to save on gas/electricity bills, 22 percent of Australians will continue to cut down on take-away meals and 23 percent of French say they will continue to use their car less. Nearly one in three (29%) global consumers will continue to economise on gas and electricity, while one in six will continue to cut down on take- away meals. One in six global consumers will continue to purchase cheaper grocery products, spend less on new clothes, cut down on out-of-home entertainment and one in seven will reduce telephone expenses. Saving on gas and electricity, cutting down on take-away meals and spending less on new clothes (and switching to cheaper groceries) are key global trends today that may stick in the post recession world. On a regional basis, Pacific, North American and Western European consumers will continue to switch to cheaper grocery products, while consumers in the emerging markets of South Africa, Turkey and Latin America will try to reduce telephone expenses in the post-recession era. Of all regions, Europeans will still be watching their expenditure on out-of-home entertainment most closely. Not surprisingly, consumers in the US and Europe -- hardest hit by the global recession -- are most determined to cling to future cost saving measures in the post-recession world. Consumers in the BRIC markets, on the other hand, are generally looking forward to putting recent recessionary behaviours behind them and returning to their previous spending patterns, especially Chinese and Russian consumers.

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UTILIZATION OF SPARE CASH

60 50 40 30 20 10 0

Mar-09

Jun-09

BRIC and Asian markets scored the greatest increases in Consumer Confidence Indices in the past three months. The Confidence Index climbed 13 points in India and rose eight points in Russia and Brazil. While the BRIC markets did not escape the ravages of the global recession, the downturn is unlikely to have a marked long-term impact on consumer behaviour. Unlike their Western counterparts, resilient and adaptable BRIC consumers simply tightened their belts temporarily and will soon return to their previous spending habits and lifestyle. The experience of previous economic crises in Latin America in particular has produced a very adaptable consumer who had learnt to act quickly and make necessary lifestyle cuts during downturns. Among the BRIC nations and perhaps all nations globally, the Chinese today remain the most confident of an economic rebound in the near future. In the Nielsen Global Confidence Survey conducted in March 2009, China recorded just a seven point drop in consumer confidence in the past six months compared to double-digit declines in Russia, Brazil and India. In the latest Nielsen Consumer Confidence Index in late June, consumer confidence in China increased six Index points. Despite the global recession hitting hard in 2008, China still managed to achieve moderate GDP growth. The Chinese governments immediate response to the turndown with a domestic stimulus package - equal to 13 percent of the countrys GDP - played a significant factor in reassuring the Chinese that they would not be headed for a protracted economic slowdown. Advertising spend in China grew by 17 percent in 2008, driven by ad increases in pharmaceutical/health, toiletries, beverages, business/industry/agriculture and food products. Sales of FMCG products remained robust and rose by 21 percent last year compared to 2007.

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GLOBAL COST CUTTING MEASURES ADOPTED BY CONSUMERS

On a global scale, continuing to save on gas and electricity bills has become a lifestyle habit. Among those 69 percent who have already taken action to reduce these bills since the onset of the recession, over 50 percent of Australians, Kiwis, South Africans, Filipinos, UK, Irish and US consumers say they will continue to take further action to reduce household utility bills. As economic recovery gathers pace, consumption and spending will increase but the post recession consumer is likely to consume very differently. The post-recession consumer will think twice and sometimes thrice about making purchases, big or small. The recession affected all social classes and has fundamentally changed how consumers consume and particularly in the West where its now fashionable to be frugal; and trendy to be thrifty.

COST CUTTING MEASURES ADOPTED BY CONSUMERS

cut down on smoking cut down on at home look for better deals on use car less often delay upgrading technology switch to cheaper grocery cut down on out of home try to save on gas & electricity
0 10 20 30 40 50 60

actions predicted in march 09

actions taken in june 09

THE CHALLENGE FOR MARKETERS IN THE POST-RECESSION WORLD

Major international FMCG and fashion manufacturers face the same dilemma in the postrecession world how to convince consumers to switch back to their old brands or try new brands when they have experienced and been satisfied with the quality of a lower-priced option theyve switched to during the recession. This question has played on manufacturers minds throughout the recession resulting in an increased focus on product innovation. The economic downturn sowed some ripe seeds for product innovation marketers know theyre going to need a particularly innovative product that hits all the right spots with consumers to pry them away from their usual brand. Success in the post-recession era is based on achieving the right combination of value, product innovation and competitive differentiation. In addition to product innovation, manufacturers now have to consider the impact of brand values and corporate responsibility on sales. Brand values used to be the domain of the 25 | P a g e

marketer but these days, it has become a purchasing factor. The post-recession consumer has reassessed their lifestyle and has become a more socially aware and ethically- minded buyer. They expect the same values to resonate in the brands they buy and companies they buy from. The successful, post-recession FMCG companies will have to be ethically and socially accountable in the way their products are sourced and manufactured, environmentally aware and good corporate citizens in every way.

CONSUMER BUYING BEHAVIOUR IN INDIA

India has always been a diverse market, with different consumer segments exhibiting varied buying behaviour. The difference is that in the past the lower SEC consumers did not have the same confidence about the future and therefore, if he aspired to something, he saved up until he could afford to buy it. Today, the consumer would rather buy something immediately, even if it means taking credit, rather than save and buy something tomorrow. Thus, there has been a decreasing fear of debt and credit cards have become the new currency. Total spends on cards in India are of the order of USD 15 billion, which sounds like a reasonable number but is actually only 3 per cent of family consumption expenditure. In other developed markets this number is around 30 per cent. The interesting point, however, is that this very paradox is actually a huge opportunity and it remains to be seen how consumer companies will take advantage of it. What is important for marketers to understand are the dynamics of this change. What is it that makes Indian consumers spend their money, especially since it is finite and definitely lower than the income of their developed country counterparts? A large part of consumption is currently being driven by emotional discretionary income, enabling people to spend on things beyond basic necessities such as food, education and shelter. But where will they make the trade-offs and what will they spend on? Health or education; fashion or technology? These are the questions that are keeping Indian marketers awake at night. 26 | P a g e

THE INDIAN CONSUMER MARKET LANDSCAPE

The Indian consumer story is one that has caught the attention of the rest of the world. Rising incomes in the hands of a young population, a growing economy, expansion in the availability of products and services and easy availability of credit all of this has given rise to new consumer segments and arising acceptability of debt. While consumerism has seen a gradual build-up, what is certain today is that there has been a genuine uptake in consumption. Whether it is mobile phones, credit cards, apparel or organised retail, people clearly seem to be spending more, particularly on discretionary items. And the consumer seems to be everywhere, whether it be the large metros, the emerging new cities, the small towns and even rural India. What has emerged in this consumer story is the fact that there is much more homogeneity in the market than ever before; for the first time some patterns have begun to emerge in consumer behaviour. It is no longer true that a premium product needs to be expensive and technology is a large contributor to this trend. So whether it is mobile phones, digital music players or even the new Tata Nano, the price/value equation has forever been altered. This has led to an increase in expectations as well as the desire for immediate satisfaction, which in turn has raised expectations for customer service. Today, every city has its premium consumers and its middle class consumers and this has put companies into a fix. They now need to craft strategies that address the subtle differences but satisfy each group equally. So what is the Indian consumer market today? It is a market with three segments. The first comprises the top end with the mindset: I pay more to get more, where the purchase is driven by the emotional surplus that the consumer experiences. The second is the mid-level which thinks: I get good value at a reasonable price. More important, however, is the large block at the bottom which says: I pay less and I get less and is totally satisfied with that. This is probably a segment that many marketers tend to overlook since they feel that there is no existing demand there. Nothing could be further from the truth. There is a growing realisation today that it is easier to compete in the smaller towns because many of the big brands and their marketing managers and sales teams dont make the effort to travel there. Hence, if one does go there, market share is easy to achieve because even though the overall pie is smaller, there is less competition.

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EMERGENCE OF THE NEW CONSUMER

Understanding the Indian consumer market means understanding its individual segments. Pertinent questions facing Indian marketers today include:Who are the new consumers? What are they spending their money on? From pester power, kids have changed their role to becoming influencers. In the older age group, they have actually become consultants, whom parents turn to for advice during the decision-making process. Three major emerging segments were identified: Kids, the Youth (including the young working singles) and the Urban Indian Woman. These segments have shown a tremendous increase in influencing and driving purchase decisions and hence are huge drivers of change in the consumer market. More interestingly, purchases are being driven not by necessity, but to satisfy individual needs. A high-potential emerging market is also the vast rural hinterland, which has its own unique characteristics.

Kids: Getting older younger

There are 300 million children aged between 414 years in India a vast market by any standards. The role that children play in purchase decisions has changed dramatically in the past 45 years. And this is not only in product categories like confectionary and toys, but in larger long-term-use categories such as cars, electronics and even consumer durables like refrigerators and air conditioners, which were, traditionally, decisions taken by parents. Today the roles are reversed, with kids pointing out the pros and cons of purchase decisions to their parents. In fact, in the older age group, kids have actually become consultants, whom parents turn to for advice during the decision-making process. One aspect that has contributed to this change is the fact that kids seem to be growing older younger a 12year-olds state of mind today is similar to what a 14-year olds would have been 10 years ago. Due to a higher degree of exposure to the outside world, their awareness levels are rising and as a result, they are clearer about what they want. Another driver is their mastery of technology, which is a primary component of a high proportion of new products in the market. The relative ease with which they are able to grasp technicalities and understand product features and usability (or lack of) has made them experts in the eyes of their parents.

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Parents are also becoming more indulgent. The relationship between parents and children has changed, moving from a hierarchical system to one driven by respect for childrens views and abilities. What is fascinating is that this demographic shift is being seen across categories and even across cities and is another characteristic of the homogeneity trend visible in the Indian consumer market. As in the broader market, while the values, beliefs and way of life between geographical areas maybe different, the shift in the role of kids in purchase decisions is identical. This change also reflects social and economic drivers. The relationship between parent and child has changed, moving from a hierarchical system to one driven by respect for childrens views and abilities. Peer pressure for children and the ever-increasing multitude of choices in products has also added to demand.

Youth: Charting their own path With the majority of its population below the age of 25 years, Indias young consumer market is the primary target of every consumer goods company. In terms of aspiration between SEC A, B, C, D, E there is no difference in the mindset of the younger demographic. The aspirations of the youth are the same, driven primarily by the fact that they are all Internet savvy and this has given them equal access to information. They are also a unique market. Along with the love for brands and gadgets, they are equally comfortable with Indian values and Indian culture. Life is about visiting religious centres with their parents and then spending the evening with friends at the local club or a similar social venue. Indian youth are also very patriotic, not in the classical, pre independence sense but in a modern sense which reflects their pride in being Indian in todays world. As a segment, they are on the whole sensible, very clear about what they want to achieve in their lives and not easily carried away by hype and show. The outsourcing phenomenon in India has been the main driver of this consumer segment. A larger number of younger people now have cash in hand and this combined with increasing brand awareness has resulted in a lot of spending on leisure and personal gratification. The young generation lives for today; the concept of saving for a rainy day is alien to most of them especially since the majority of them have not experienced shortages in their lives. This is also a segment constantly on the move mentally and physically. The young do not want to be at home and are spending twice the amount of time outside the house than they would have done a couple of years ago. So, whether they are at a multiplex, a mall or a cyber caf, hanging out with friends is a clear preference. The youth practices extreme multitasking using a mobile and an iPod as well as surfing the Internet, 29 | P a g e

while chatting with friends. They seem to want to do five things at the same time!. All of this has raised new challenges for marketers, the basic question being: How does one actually address such a person and get inside their way of life? This is a segment which has a short attention span, a limited amount of patience and is already focused on three other things at the same time. Direct advertising through mobile phones is one option, but constant SMSing can actually hurt a brand if it is taken as an intrusion into their privacy. Furthermore, this segment is also very vocal about their feelings and will express their irritation with a brand to an average of 910 individuals, compared with 23 a decade ago. For urban teenagers, or those in a small town, there may be marginal differences in their degree of preparedness to pay or their awareness levels, but they all have a similar mindset driven by the desire for success and the need to enjoy that success. This is why it is such a great time to be a consumer marketer today.

The Urban Woman: Defining her own space In India, it has been a long-accepted fact that it is the women in a family who define the environment at home. In the urban cities and even in small towns, they have been the silent influencers for some time now, directing family purchases and expenditures. It is only recently, however, that the urban woman has come into her own, and today there is no looking back from her newly gained independence. In the past five years, there has been a large increase in the product categories specifically targeted towards the urban woman. Be it mobile phones, computers, apparel, jewellery or even financial products, women in the cities are finding themselves spoilt for choice. Which brings us to the question: Just who is this new age woman? What is she like? One prominent manifestation of this segment is seen in the daily soap operas on Indian television. While the characters may seem regressive at first glance, increasing viewership has proved that they have struck a chord whether the woman is a homemaker or a professional. There is another unique characteristic of this segment. The urban woman wants to break out from her traditional, sacrificing image, but does not want to go all the way. She wants to conform to the values she believes in and yet wants to do her own thing. And in the midst of this soul-searching process, the marketer is bewildered. It is a challenge to identify the boundaries correctly and to touch the right chord with this new consumer. 30 | P a g e

A measure of her growing independence is the changing profile of the urban womans out-ofhome activities. Today women go out with each other, a trend that was not seen previously. They are also much more into indulgence and satisfying their emotional self. So, whether it is spending time at clubs with friends, pampering herself at the salon, experimenting with cosmetic surgery or enrolling at the fitness centre, the need to look good has now become a priority. It is no longer only about getting married and having kids. There are two things happening one is behavioural change in terms of the consumer and the second is structural change in terms of the retail outlets themselves. Therefore, women are feeling more and more secure that they can go into a store and actually get the product. The Indian woman is perhaps less homogenous and more conflicted as a consumer group compared to the Indian man. The change for women is starker. While the traditional role of the male has not changed much, the role of the woman changes dramatically the minute she achieves a level of economic empowerment or moves out of a joint family home into an independent one where she has much greater ability to influence decision making. And while she enjoys this independence, she may experience a certain level of conflict as she constantly wrestles with her role change between her professional life and her domestic one. The problem is compounded to a certain extent in that women have effectively transitioned many generations in a very compressed period.

Rural India: Waking up to opportunity

The growing rural market in India has already become a focus for consumer companies. There are regions of India that are growing at 1530 per cent in terms of spending power. The aspirations of populations in the semi-urban and rural areas are also much greater than their urban counterparts, especially because they are being exposed to a range of products and services that they have never seen before. This translates into a larger marketing opportunity for companies. Purchases are sometimes triggered by social pressures, for example a farmer wanting to buy the best tractor, not because he needs it but because his neighbour owns one. This kind of behaviour leads to a higher number of loan defaults and often happens because there is a

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fine line between intention/desire to pay and ability to pay in the case of the average rural consumer a sign that companies sometimes misread. However, the scenario is changing. There was consensus across the board that technology has given rural India a new identity. An area with potential is the smart card, which can be used for multiple purposes whether it be to draw cash or make payments for seeds and fertilisers. The biggest benefit is that a smart card can be used by individuals who may be illiterate as well, since it stores cardholder information and is linked to the purchase centres. The retail experience is also distinct for new products and services. Gadgets like mobile phones are sold through kiranas (small family stores) and telephone booths since those are the outlets that have electricity. This is the total opposite of the mall culture seen in urban India and it is a need that consumer companies will need to address. Another gulf between urban and rural communities is consumer education. While rural consumers are becoming increasingly comfortable with technology, understanding it is still on a need-to-know basis and learning the basics is taken as sufficient.

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CONSUMER CONFIDENCE INDEX, INDIA

Consumer confidence is a key driver of economic growth. It is widely considered an economic indicator of household consumption expenditure. Consumers tend to increase consumption when they feel confident about the current and future economic situation of the country and their own financial situation In economies such as India and the US where personal consumption represents 66% and 71% of GDP respectively, consumer confidence has a particularly significant impact on the economy and can provide critical insight into its growth prospects Despite the global economic recession, Indians seem to be quite confident of the economy picking up in the near future they have a firm belief that the global recession will have a limited impact on Indian economy due to large domestic consumptions. Though, the recession has had some impact on Information Technology, real estate and manufacturing sectors still economists are of the opinion that India will not suffer a great impact. Most Asian economies are models of prudence, unlike American and European households where borrowing is up to the hilt. Asias emerging economies have witnessed their GDP growing at an annual rate of 7.5 percent over the past decade, two-and-a-half times as fast as rest of the world. In a recent study, A.T. Kearneys Global Retail Development Index 2008 suggested that India is still the best investment destination for the retail sector followed by Vietnam. A few large corporate houses involved in the Indian retail sector have planned to go ahead with their expansion strategies as per the schedule, despite the world financial turmoil. The Consumer Confidence Index study (2008) further revealed that while Indians intentions to spend on personal comforts such as new clothes, home improvements/ decorating, technology products are stronger than the global average, their intention to spend on holidays and out of home entertainment is much lower. In a nutshell, this indicates a general tendency among Indians to lead a comfortable day-to-day life by cutting out the frills. For the marketers, investment in brands today is necessary to secure brand loyalty for better times ahead. Ken Favaro, et.al (2009) is of the view that the retailers should use the following five rules for retailing in recession times. But even in these tough times, retailers may win new business and gain customer loyalty by focusing on people who are not their best customers but yet by making sure they offer what those customers really value and demand. The five rules as suggested by Ken Favaro to gain market share and protect margins are as follows: 1. Focus on customers who are loyal neither to the firm nor to their competitors. 2. Close the gap between the customers needs and the current offering. 33 | P a g e

3. Reduce the bad costs, those producing benefits customers wont pay for. 4. Cluster the stores according to local similarities and differences in customers needs and purchase behavior. 5. Retool the processes customer research, merchandise planning, performance management, strategic planning to position the company in a much better manner.

Retail Pricing Strategies in Recession Economies

A recession economy can cause severe price destruction and can force retailers to react strategically. Resource abundant firms may use a predatory pricing strategy to maintain their predominant position in a market, but resource-scarce firms must join the price destruction war. However, even for the wealthiest firms, aggressive pricing may not be the solution for success in a recession economy. Many studies have pointed out that the overuse of price as a promotional tool may damage the prestige of the brand (Chapman and Wahlers 1999). It is dangerous for firms to rush into price competition without considering the possible side effects (i.e., the consumer perception of the quality of products or services). Firms need to consider both internal and external influences on pricing when forming a sustainable strategy to cope with price destruction.

Internal Influences on Pricing

To deal with the price destruction caused by a falling economy, the most prestigious brands may be able to resist price attacks by competitors and preserve their competitive edge. Nevertheless, most companies need to participate in a price war. The most cost-efficient companies may be able to survive by driving the firms that are short on resources out of the market (Guiltinan and Gundlach 1996). It is understandable that resources, whether intangible or tangible, are the key for companies to outperform their competitors during episodes of price destruction. Thus, as stated by the resource-based school of thought, a resource-based view should replace the product-based view in marketing decision making (Wernerfelt 1989). A resource-based approach to marketing suggests that a long-term cultivation of corporate level resources and capabilities will bring the organization a sustainable competitive advantage (Barney 1986). Indeed, since the 1960s, models of strengths, weaknesses, opportunities, and threats have been widely applied to strengthen organizations competitive advantage by promoting both environmental analyses and resource-based strategies. Firms make a constant effort to use internal strengths to seek

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external opportunities and to eliminate potential damages from outside threats. Firms are advised to select resources that are compatible with themselves and that enhance their capability in acquisition and cultivation in order to build up long-term competitive advantage.

External Influences on Pricing

Although the availability of organizational resources is an important perspective in the consideration of an aggressive or predatory-pricing strategy, the demand-side effects of such a strategy are another concern. Most consumers are sensitive to price. As Mazumdar and Papatla (2000) note, consumers tend to use reference price as a supplementary guide for consumption decisions, in which price information is accumulated either from previous experiences or from comparisons made among available brands. As long as consumers use price as an index for shopping, firms can use price to influence consumer behavior. For example, Miller, Ogden, and Latshaw (1998) show how price can be used to trigger consumer behavior. In their analysis, they manipulate price and product features to influence consumers preferences for an assortment of products. They find a negative connection between price level and willingness to buy. However, when a product features key values that fit with consumers needs, firms can raise the price while keeping a preference for the product stable. Chaudhuri and Holbrook (2001) provide a similar observation that Brand affect resulting from a wanted hedonic value can increase loyalty to the brand and thus allow for more room for price to rise. Indeed, for a costly purchase, consumers tend to believe that a price is fair when they agree with it. To some extent, price can be subordinate to product worthiness in the consumption decision. In contrast, reference price can also be used to signal product quality (Teas and Agarwal 2000; Yoo, Donthu, and Lee 2000). Chapman and Wahlers (1999) report a positive link between reference price and consumers opinion about product quality. Although a high-priced product (the actual price) can require a certain amount of sacrifice on the part of consumers, it is equally true that the higher the price (reference price) of a product, the greater is the esteem in which consumers hold the product. Therefore, perceived value is the trade-off between perceived sacrifice and perceived prestige. Yoo, Donthu, and Lee (2000) also observe that a frequent use of price deals results in an unfavorable quality perception and blocks brand associations and awareness. These findings echo traditional beliefs in brand management that consumer preference for a certain brand can be easily damaged after price promotion (e.g., Guadagni and Little 1983; Ogilvy 1963; Scott and Yalch 1980). However, a few studies oppose this assertion (e.g., Davis, Inman, and McAlister 1992). This inconsistency may be because of contingent factors that moderate the pricequality bond. As Hoch and colleagues (1995) demonstrate, consumer demographic variables, such as age, education, family size, and 35 | P a g e

income, shows a much stronger impact on price sensitivity than competitive variables. To be insensitive to price suggests that these consumers tend to give more weight to other product values, such as quality or hedonic attributes, thereby weakening the connection between price and product quality. Raghubir and Corfman (1999) also report the role of industrial conditions and the use of experience in conditioning the use of price as a quality cue in consumption. They argue that pricequality bonds tend to be diluted when price promotion is common in the relevant industry.

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DATA ANALYSIS

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CONSUMER CONFIDENCE INDEX INDIA 2008

Consumers in India are approaching the upcoming six months with increased levels of optimism, according to the latest MasterCard Worldwide Index of Consumer Confidence survey. Consumer confidence in India is now at its highest since the drop in late 2008 73.0 as against 63.9 in the second half of 2008 and is slightly above the average Index score for Asia/Pacific (68.0). According to MasterCard Worldwide Index, consumer confidence in India is now at its highest level 73 points since the drop in late 2008. The Index is based on a survey, which measures consumer confidence on consumer expectations for the next six months on five indicators economy, employment, stock market, regular income and quality of life. The index score is calculated with zero as the most pessimistic, 100 as most optimistic and 50 as neutral. Amongst the five indicators, respondents in India seemed most optimistic about regular income (75.4) slightly more positive than six months ago (74), it said. The quality of life indicator grew to 71.3, consumers sentiment about the employment (70.8), consumers perceptions about the economy (72.2) and employment (70.8). In terms of geographical location, Chennai and Bangalore have displayed the highest levels of consumer optimism among Indian cities with Index scores of 90.7 and 85.6 respectively. Consumers in Mumbai have maintained healthy optimism with an Index score of 76.6. In contrast, consumers in Delhi are less positive than their counterparts about the upcoming six months, reporting an Index score of 38.0. Across Asia-Pacific, which comprises 14 markets, the overall consumer confidence remained modestly optimistic with an index score of 68, marginally lower than six months ago (69.1) but higher than a year ago (66.3), when the region was beginning to recover from the effects of the global financial crisis, the survey said. Strong GDP growth and rising personal demand have fuelled a remarkable increase in optimism among Indian consumers. This is clearly reflected in the increase in the Index scores in India, across all five survey indicators as compared to six months ago.

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CONSUMER CONFIDENCE INDEX INDIA 2009

Consumer confidence across the Asia Pacific region has dropped 7 points in the last 6 months. The Mastercard worldwide index of consumer confidence reveals that consumers in the region are pessimistic about the first six months of 2009. Indias current index score is 63.9 showing that consumers in India, though optimistic, are less so than six months ago (82.1) and a year ago (86.6). The score, slightly better than its historical average of 62.3, is India's lowest score since 2004. However, amongst the 14 countries surveyed by Mastercard, India along with China, Vietnam and Singapore have shown optimism in consumer confidence which will continue till early 2009. Of the three cities surveyed in India, Bangalore scored the highest thus giving a boost to the overall score. Delhi and Mumbai have both seen a drop in consumer confidence over the past 12 months. Consumer sentiment in India has gone down on all five economic factors employment, quality of life, regular income, stock market and the economy. Consumers are a lot less optimistic about quality of life (58.9 against 87.7 six months ago) and employment (50.4 against 75.1). "With the European and the US economies in a deepening recession, the world is looking to Asia, particularly developing Asia, to provide the locomotive for global demand. In the past, the region's households were more known for their propensity to save. Today the question is, are they in a mood to spend, and can they replace the American consumer whose wealth and income are both under assault. The results of the survey show that consumer confidence in September 2008 is back to roughly its historic average," said Suman Bery, director-general, National Council for Applied Economic Research (NCAER). In the Asia Pacific region Vietnam tops the index, with a score of 88.1. At the other end of the spectrum, nine markets are pessimistic about the first half of 2009, with Hong Kong (41.8 against 83.1 six months ago) and Taiwan (32.1 against 71.3 six months ago) recording the biggest declines.

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CONSUMER CONFIDENCE INDEX INDIA 2010

The consumer confidence levels in India have risen by two points and reached 131 index points Philippines followed India to the second spot with 120 index points and Norway came third with 119 index points. Globally, confidence levels fell in 25 out of 52 countries surveyed in Q4 2010 as hope for a global economic recovery evaporated at the end of last year. According to the survey, which polled over 29,000 Internet consumers in 52 countries in November 2010, confidence levels fell in half of the countries surveyed as widespread concern for unemployment, job creation, rising food and utility costs eradicated any expectation of sustained economic recovery. The global consumer confidence index at the end of 2010 remained unchanged from the previous quarter at 90 and finished the year two index points below the start of the year. India has topped the Consumer Confidence survey in all four quarters of 2010 and has also seen a steady rise in index points. This is a good sign for us as this means that the economy is fast moving out of the slowdown. But global economic conditions have made Indians wary about the future and they are exercising some restraint in their spending habits. Three out of ten Indians think that the country is in an economic recession. However the percentage of Indians who think that the country is presently in recession has gone down by three percent to 30 when compared to the last leg of the survey. Out of those who think that India is in a recession, 55 percent believe that the country will be out of recession in the next twelve months, which again indicates an overall positive consumer outlook for the economy. Globally, India ranks first as a country that believes that they will be out of the economic recession in the next twelve months. Amongst the 52 countries that participated in the survey, 14 saw a consumer confidence index of 100 points or higher, nine of which hail from Asia Pacific This is an increase compared to 11 countries who hit the 100+ index mark one year ago. Confidence Index provides a single indicator of consumer sentiment towards the current economic situation as well as intentions and expectations for the future. Levels above a baseline of 100 indicate degrees of optimism. Optimism reigns high in India Increasing confidence levels in the countrys economy translates into optimism for Indians, at least when it comes to their job prospects in the next twelve months. Indians are globally the most optimistic on this count. Nine out of ten Indians (90%) are optimistic about their job prospects in the next twelve months.

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This is a percentage point lower than in the last quarter, but India tops the list of countries who think that their job prospects are excellent or good in the next twelve months. The percentage of Indians who think that their job prospects are excellent has g one up from 29 to 31 percent compared to the previous quarter. Nearly six out of ten Indians (59 %) consider their job prospects good in the next twelve months. Norway (83%) and Singapore (79%) are the next most optimistic nations on job prospects in the next twelve month. Not only job prospects, Indians are also optimistic about the state of their personal finances in the next twelve months. More than eight out of ten Indians (84%) are optimistic about their personal finances in the next twelve months, which is also the highest ranking globally. This has gone up by a percentage point compared to the third quarter of 2010. Eighteen percent Indians consider their state of personal finances excellent and 66 percent consider it good in the next twelve months. Indonesia (81%) and Norway (79%) are the second and third most optimistic nations respectively in terms of the state of their personal finances in the next twelve months. Despite the overall economic confidence over the economy and job market, Indians tightened their purse strings slightly in the fourth quarter of 2010. Of the Indians surveyed, 56 percent believed that it was a good time to buy the things that they felt they wanted but in the previous quarter it was higher at 59%. Global economic conditions are acting as a deterrent to the spending habits of Indians. We saw a resurgence in spends in the previous two quarters but the last quarter of 2010 shows a decline in spending intentions. Under the current scenario, marketers will have to try harder to get the consumer to reflect the confidence that they show in their job prospects and state of personal finances in their spending habits. What do Indians do with their spare cash? Indians have always put their spare cash into Savings and the priority remains the same, 65 percent Indians say they will put their spare cash into savings after meeting their essential living expenses. The percentage of Indians putting their discretionary income into savings remains the same as in the last quarter. India ranks fourth globally for a country that puts its spare cash into savings, behind Thailand (73%), Indonesia (72%), and Hong Kong (66%). After saving, Indians like to invest their spare cash in the stock market or in mutual funds. However, in the fourth quarter of 2010, the percentage of Indians who invest in stock market related schemes has gone down by three percent to 45 compared to the last leg of the

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survey. India ranks third globally for a country that puts spare cash into shares and stocks, behind Hong Kong (56%) and China (51%). There is an overall decline in Indian discretionary spends, but the highest decline is seen in Indians putting spare cash into New clothes, which has gone down eight percent to 31 compared to the last round of the survey. Another item on the spare cash list that has taken a big hit is the Out Of Home Entertainment, which has gone down by six percentage points to 23. Paying off debt/ credit cards/ loans (29%) and Retirement Funds (24%) has experienced a five point drop. India ranks third globally in putting spare cash into retirement funds, behind China and Czech Republic (both 30%). A four percent drop is seen in the number of Indians who put their spare cash into New technology products and it has gone down to 38 percent. But still, Indians say spending on technology will be their third preference when it comes to spare cash utilization. But on the global ranking India ranks second in a population that plans to spend on new technology products, China leads with 41 percent votes. Holidays/ vacations (35%) and Home improvements/ decorating (34%), though rank fourth and fifth respectively on the spare cash utilization list, but has dropped by three percent when compared to survey in the previous quarter. The percentage of Indians who have no spare cash has gone up by one percent to four. The decline in spending is a cause of worry to some extent. Indians are weighing their options against a global backdrop of a recessionary mindset, so even though they are the most confident global consumers, Indians are still wary of going out and spending.

Major Concerns for Indians Over the next six months Indians are most concerned about Increasing food prices, fifteen percent Indians consider it their biggest concern and India ranks fourth globally in its concern for increasing food prices. In fact concern levels around increasing food prices have remained the same for both the third and fourth quarter. China tops in its concern over increasing food prices with 19 percent of consumers in China voting it as the biggest concern over the next six months. Following a similar trend as in the previous quarter, Work/ life balance (12%) and Job Security (10%) are the second and third biggest concerns for Indians in the next six months.

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Other concerns for Indians are Childrens education and/or welfare (8%) and Parents welfare and happiness (8% - 3rd highest globally). Childrens education and/or welfare has moved up the concern list and concern over parents welfare and happiness has increased by two percentage points. Concerns surrounding Terrorism at seven percent (4th highest globally) has increased for Indians. At 6 percent Health, Economy, and Global Warming are the next set of concerns for Indians. India ranks second in its concern for global warming. Increasing utility bills (electricity, gas, heating, etc) 5 percent and increasing fuel prices (4%) are some of the other concerns for Indians. Increasing food and fuel prices remain a big concern for Indians and have a significant bearing on their lifestyles as they try and balance rising costs by cutting down other living expenses Saving on household expenses? Compared to this time last year, more than seven out of ten Indians (72%) have changed their spending habits to save on household expenses; this is two percentage points higher than in the third quarter. More than half the Indians (51%) surveyed, now spend less on new clothes to cut down expenses, however the percentage of Indians who plan to cut down buying new clothes has gone down by seven percent compared to the previous quarter. 50 percent Indians try to save on gas and electricity, compared to 56 percent in the previous round who said they would cut down on gas and electricity to save on household expenses. 43 percent of the Indians surveyed say they will cut down on out of home entertainment, 41 percent on telephone expenses, 38 percent on holidays/ short breaks and 35 percent will delay upgrading technology, e.g. PC, mobiles, etc. to save on household expenses. There is a fair amount of correlation on items that Indians have decided to cut down spending on to save on household expenses and the items that show a decline in discretionary spends, like decline in spending on new clothes, out of home entertainment, new technology products, all have taken a hit. As per the survey, the top five activities that Indians say they will continue to cut down expenses on even after economic conditions improve are, to try and save on gas and electricity (37%), which has gone down by nine percent compared to the previous round of the survey, spend less on new clothes.

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(22%), cut down on telephone expenses (20%), cut down on take-away meals (17%), and look for better deals on home loans, insurance, credit cards, etc (16%). Despite their concerns over rising prices, the amount Indians have cut down to save on household expenses has gone down, which again is indicative of a confident economy with equally confident consumers while remaining conservative as is seen from their emphasis on saving.

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consumer price index for Industrial workers Table- 1 state Andhra pradesh Assam Bihar Chatisgarh Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerela Maharastra Madhya Pradesh Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Chandigarh Delhi All India 2007 132 130 138 136 139 134 135 129 129 137 133 132 140 136 136 138 137 124 137 134 133 129 134 (Base 2001=100) 2008 2009 2010 152 141 149 149 165 141 151 151 141 151 152 152 155 150 154 154 152 140 151 146 147 142 149 183 158 167 174 192 159 171 171 158 173 175 175 174 172 175 175 173 160 176 166 169 158 169 206 172 187 192 216 186 195 195 177 189 192 189 194 192 193 193 200 180 195 185 189 174 190

Table 1- Consumer Confidence Index for Industrial Workers (Food)

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Consumer Confidence Index for Industrial workers(Food)

All India
Delhi Chandigarh

West Bengal
Uttar Pradesh Tamil Nadu

Rajasthan
Punjab Orissa

Madhya Pradesh
Maharastra Kerela 2010 2009

Karnataka
Jharkhand Jammu & Kashmir

2008
2007

Himachal Pradesh
Haryana Gujarat Goa Chatisgarh Bihar Assam Andhra pradesh 0 50 100 150 200 250

Fig- Graphical representation of Consumer Confidence Index for Industrial workers(Food)

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state Andhra pradesh Assam Bihar Chatisgarh Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerela Maharastra Madhya Pradesh Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Chandigarh Delhi All India

2007 111 107 120 105 119 112 119 123 119 116 99 117 130 114 121 129 125 107 119 121 135 112

2008 108 110 124 106 120 114 120 125 126 120 105 119 131 116 128 131 128 112 123 131 140 116

2009 109 121 132 106 128 117 122 129 141 122 110 125 133 117 138 130 131 117 127 140 142 120

2010 112 145 161 110 145 126 135 134 168 130 114 129 139 121 146 133 138 116 133 156 149 131 133

117

121

126

Table 2- Consumer Confidence Index for Industrial Workers (Clothing)

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Consumer Confidence Index for Industrial workers(Clothing)

All India Delhi Chandigarh West Bengal Uttar Pradesh Tamil Nadu Rajasthan Punjab Orissa Madhya Pradesh Maharastra Kerela Karnataka Jharkhand Jammu & Kashmir Himachal Pradesh Haryana Gujarat Goa Chatisgarh Bihar Assam Andhra pradesh 0 20 40 60 80 100 120 140 160 180

2010 2009 2008 2007

Fig- Graphical representation of Consumer Confidence Index for Industrial workers(Clothing)

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Agricultural Labourers
200506 Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Jammu & Kashmir Karnataka Kerala Madhya Pradesh Maharashtra Manipur Meghalaya Orissa Punjab Rajasthan Tamil Nadu Tripura Uttar Pradesh West Bengal 376 343 338 377 388 347 365 333 347 352 372 307 371 316 394 377 327 336 375 318 200607 408 372 379 415 422 379 401 360 364 395 413 318 400 352 436 418 337 367 419 343 200708 441 409 409 434 472 389 425 404 395 421 446 347 436 391 460 436 369 398 443 381 200809 503 450 442 469 533 420 471 465 452 473 497 384 495 431 527 493 424 433 477 417 201011 577 526 497 569 644 480 558 557 499 548 598 443 554 490 634 595 484 469 564 494 201112 626 586 519 614 683 504 606 612 571 583 650 520 584 528 664 608 531 523 582 544

Table 3- Consumer Confidence Index For Agricultural workers

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Consumer confidence Index for Agricultural labourers

West Bengal
Uttar Pradesh Tripura Tamil Nadu Rajasthan

Punjab
Orissa Meghalaya Manipur Maharashtra 2011-12 2010-11 2008-09 2007-08 2006-07

Madhya Pradesh
Kerala Karnataka Jammu & Kashmir Himachal Pradesh

2005-06

Haryana
Gujarat Bihar Assam Andhra Pradesh 0 100 200 300 400 500 600 700 800

Fig: Graphical representation of Consumer Confidence Index, Agricultural workers

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CONCLUSION

Key findings with respect to Indian Consumers:

69% Indians think that we are not currently under economic recession. 92% Indians are optimistic about their job prospects in next two months out of which 26% consider their prospect to be excellent whereas 66% consider it to be good.

85% consider their state of personal finances in the coming year to be good or above. The high confidence levels and state of personal finances give Indians the confidence to spend; 59% are willing and ready to spend money for the things which they would need in next year

After meeting their essential living expenses, Indians love to put their spare cash into Savings. More than six out of ten Indians put their spare cash into savings. At 63 %, savings has become dearer to Indians by three percent compared to the last survey. India ranks 7th globally which puts spare cash into savings. Next in the list for investment is Shares of stock/ mutual funds. Nearly half the Indian consumers (46%) invest in stock. The percentage of Indians investing in the stock market has 51 | P a g e

gone up by three percent compared to the last round of the survey and is the 3rd highest percentage for a country investing in the shares. Indians are a cautious clan when it comes to planning for their retirement. 23 % Indians put their spare cash into Retirement funds. This is the 4th highest percentage globally, who put spare cash into retirement funds. And its not all about savings in India, our people love to spend their spare cash on Holidays/ vacations too (38%), followed by New technology products (36% 6th highest globally), New clothes (34%), Paying off debts / credit cards / loans (30%), Home improvements / decorating (29%), and Out of home entertainment (28%). So Indians are back on a spending spree, with most activities registering a n upward growth percentage as compared to the last survey. Though the figures have changed for India positively but global recovery has actually been slower than expected. The global consumer confidence has moved down one index point to 93 in the second quarter as confidence increases in booming Asian markets were offset by European consumers growing concerns of an escalating debt crisis, which battered confidence levels in Spain, Italy and France. This quarter of Nielsen Global Consumer Confidence Survey was conducted between May 10 and May 26, 2010 and polled approximately 27, 000 consumers in 48 countries throughout Asia Pacific, Europe, Latin America, the Middle East and North America about their confidence levels and economic outlook. The Nielsen Consumer Confidence Index is developed based on consumers confidence in the job market, status of their personal finances and readiness to spend. The sample has quotas based on age and sex for each country based on their Internet users, and is weighted to be representative of Internet consumers and has a maximum margin of error of 0.6%

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BIBLIOGRAPHY
Akyuz, Yilmaz (2008), The Global Financial Crisis and Developing Countries, Resurgence, December, Penang, Third World Network. Athukorala, P. and Sen, K. (2002), Saving, Investment and Growth in India, Oxford University Press, New Delhi. Central Statistical Organization, Government of India. Chandrasekhar, C.P. and Ghosh, Jayati (2004), The Market that Failed: Neoliberal Economic Reforms in India, Left World Books,New Delhi. Chandrasekhar, C.P. and Pal, Parthapratim (2006), Financial Liberalization in India: An Assessment of its Nature and Outcomes Economic and Political Weekly, March18. Economic Survey 2010-11, Ministry of Finance, Government of India, New Delhi. Hand Book of Statistics on Indian Economy 2009-10, Reserve Bank of India. International Monetary Fund (2008a), Global Financial Stability Report, Washington D.C. October. International Monetary Fund (2008b), World Economic Out Look, Washington D.C. October. Monthly Economic Report, Ministry of Finance, Government of India. Monthly Statistics of Foreign Trade of India, Vol. I & II (Various issues), Director General of Commercial Intelligence & Statistics (DGCI & S), Ministry of Commerce, Government of India, Kolkata. Panagariya, Arvind (2008), India: The Emerging Giant, Oxford University Press, New York. Patnaik, Prabhat (2007), Financial Crisis, Reserve Accumulation and Capital Flows, Economic and Political Weekly, December 15. Patnaik, Prabhat (2008), The Value of Money, Tulika Books, New Delhi. Reserve Bank of India (2008), Annual Policy Statement for the Year 2008-09, April. Reserve Bank of India, Mumbai. Reserve Bank of India, Weekly Statistical Supplement, Reserve Bank of India, Mumbai.

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