Google+ Consumer Psyche: Rising costs and saving mantra


Wednesday, October 21, 2009

Rising costs and saving mantra

Consumers cope with soaring inflation by making significant lifestyle changes. Statistics are like bikinis. They reveal less than what they hide. Never has this been truer of India's inflation. Months of exorbitantly priced vegetables, fruits and pulses, and weeks of crippling supply constraints are wiping the smiles off the faces of the Indian consumer. What's more, they now have to make adjustments in lifestyles to cope with the monetary measures taken by the government and the Reserve Bank to curb the 'recalcitrant' inflation. Spiraling loan interest rates have sent the equated monthly installments for housing and consumer durables sky-high. The hardest hit are those with existing loans.

Even while the cash crunch continues, the future outlook is not bright. According to Federation of Indian Chambers of Commerce and Industry, the demand for refrigerators, television and two-wheelers, largely supported by personal loans, has shown stagnation. This could lead to a mismatch in supply and demand of transportation, which could lead to increase in transportation costs.

Chandigarh-based Rohini Trehan, a senior software development manager in an MNC, illustrates the effect of inflation in her household. "Our leftover food used to go to the dustbin. When things got costlier, I gave it to the maid. Then, when the dals became really costly, I started keeping the leftovers in the fridge for the next meal. Now there are no leftovers, because I'm conscious about the quantity I cook," she says. Her costs have gone up by more than 20 per cent. "A half kg of dal used to cost Rs 20, now it is Rs 50," she says. Factor in a 25 per cent hike in her son's school fees and the family's performance-related compensations, and they are still counting money. "There are so many hidden costs," says Rohini. The Trehans are in the process of renovating the driveway of their home. "If I had done this last year, I would have paid only Rs 180 for a bag of cement, now it is Rs 226. And labour cost has gone up by 25 per cent," she says.

"A salaried person has already divided his pay between the EMIs and other household expenses. How will he manage an additional 50 per cent increase in expenses on account of the hiked interest rates?" asks Alka Chawla, a lecturer at Delhi University. Alka had plans to sell her house for a new one. "We have shelved our plans," she says. "I have cut down on non-vegetarian food. Then there are expenses of education and health. You can't compromise on those," says Alka. Her daughter's school has just raised the tuition fee and things seem to be spinning out of control for Chawlas. Their new investment mantra is short-term savings.

---Nivedita Mukherjee

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