Amit is careful with his money; at least he has become careful during the past couple of months. He is not so quick to splurge on an online sale or buy new gadgets; even his ordering of food on Zomato and other apps has come down sharply. He has cut down subscriptions to multiple OTTs and hardly travels out, rarely uses his car, what with petrol hitting Rs.100-mark. He was thinking of getting a new home but he has postponed that for now and even the marriage of his sister is rescheduled for end of 2021.
And this is not just Amit’s story; millions of Indians are currently on a cost-cutting mode. “Cash in King” is the anthem and many have really tightened their purse strings. That brings us to the pertinent question – will people start spending once again when the lock down lifts and things open up?
Last year, after the strict 2-month shutdown, when the corona numbers started receding, people felt freedom and like a lion let loose, went on a rampage shopping everything in sight. That gave us a sharp ‘V-shaped’ recovery and everyone got out their scratch pads and recalibrated India’s growth rate to double digit.
Then the second wave struck and that too very badly. The blow from this wave is traumatizing and people will not be able to move on as quickly. There is now real fear – of the third wave hitting with more severity and the prospect of losing their jobs. Unemployment is today as high as what it was last year – it was at 14.5% in the week ended 16th May’21 and went up further to 14.7% for week ended 23rd May. And this time around, along with urban unemployment, even rural unemployment is high at 9.7%.
Thus the fear of a third wave and the need to save for likely tough days ahead might prevent people from spending money like they did the last time. Households would rather save money than spend it on clothes and shoes when they can go nowhere. We are already seeing the stress as loan-against-gold is surging – the CEA said that the economy might not hurt as badly is it did last time; that’s right but that time, we had the rural India to support the falling growth in urban India. This time, rural India is impacted and that will be seen in our Q1 and to some extent, Q2 numbers.
The Covid numbers might come down but this time around, unless supported by a speedy vaccine rollout; unless than assurance doesn’t come in that a third wave has been averted, people will hoard all the cash they earn.
And God forbid, if there is indeed a third wave, apart from the toll on the economy, the human suffering will become even more unbearable. Hope the Govt is also seeing the same picture as we are and does the needful to prevent this catastrophe from happening.
In economic growth, when things start to get better, it is always manufacturing and construction which first goes up. Last to show growth in such sustained phase of pain is the services sector – any front facing business today is down in the dumps. Only when we see a perk up in the service sector can we see consumer spending coming in.
Let’s hope and pray that India gets its act together on the vaccination front – that alone will give a great fillip to sentiments and buying. Vaccination is the only magic wand – for a phenomenal economic recovery, a recovery which will leave the world staring at us open-mouthed!