New Delhi: Two years ago the Covid-19 pandemic hit India and changed life as we know it. The lockdowns that followed drastically affected livelihoods, ruined the economy and forced many to remain confined to their homes.
So how has the pandemic impacted the spending behaviors of over a billion Indians that tech fuel the economy?
According to the latest data provided by the Ministry of Statistics and Program Implementation (MoSPI) In terms of consumption in FY2020/21, Indians spent less on restaurants, hotels, alcohol, tobacco and clothing, but more on groceries, especially eggs, seafood and meat.
They cut back on sodas and juices, but didn’t skimp on their morning cup of tea or coffee, the data further showed.
While Gross Domestic Product (GDP) headlines tell us about the quantum of all economic activity in a country that Private Consumption Expenditure (PFCE) — a significant component of India’s GDP – is a measure of how much people spend on the consumption of goods and services.
National Accounts Statistics, released by MoSPI on May 31, mapped consumption data for 2020-21 (revised estimates) that detail what Indians spent their money on for consumption purposes. These numbers quantify the magnitude of the changes that have taken place in each retail industry.
According to it, groceries and household appliances were the only commodity bundle that showed a positive growth rate compared to the previous pandemic-free fiscal year (2019-20), while spending for all other commodity groups saw a decrease.
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Big cuts in spending on restaurants and hotels
According to MoSPI statistics, the most affected consumer sectors in the pandemic year were: restaurants and hotels, clothing and footwear, durable and durable goods, transportation, alcoholic beverages, tobacco and narcotics (intoxicants), and home and leisure sectors.
These sectors saw a growth slowdown of over 10 percent in 2020-21 compared to 2019-20. Total consumption in the same period in these industries down 6 percent.
In 2020-21, Indians spent Rs.92,671 crore on restaurants and hotels, while they spent more than double the previous year – Rs.2 crore.
On average, consumption in this sector grew at 8.7 per cent per year with average spend of Rs 1.7 lakh crore in the five years leading up to the pandemic – 2015-16 to 2019-20.
The pandemic dealt a serious blow to the tourism industry, and many hotels were forced to close as a result. Her steps also dropped drastically due to Covid restrictions being put in place in restaurants.
The restaurant and hotel sector accounted for about 2.4 percent of India’s domestic consumer spending on average (2015-2020), which has been halved to just 1.2 percent during the pandemic, MoSPI data shows.
The industry had estimated a loss of Rs 1.4 lakh crore in the first year of the pandemic, according to Gurbaxish Singh Kohli, vice president of the Federation of Hotel and Restaurant Associations of India.
“The GDP figures from the consumption data have confirmed our estimates and also justify our continued clarion call to the government for some concrete support measures for the industry to get out of trouble,” Kohli told ThePrint. “Given the massive damage that has decimated the sector’s ecosystem, the industry looked to the government for strong measures to support hospitality and related activities.”
22% less spending on clothes and shoes
Aside from restaurants and hotels, Indians also spent less money on clothing.
In 2019-20, Indians spent around Rs.4.43 billion on clothing and shoes, which fell by 22.2 percent in 2020-21. The consumption of these items grew slowly by 1.3 percent (calculated based on MoSPI data)and this has been exacerbated by the pandemic.
As the pandemic restricted outdoor, locomotion and travel, Indians significantly reduced their spending on transportation. In 2020-21, consumers spent Rs 12.27 crore on transport – down 19.4 per cent compared to 2019-20 (Rs 15.23 crore).
Alcohol consumption is declining sharply
The consumption of alcoholic beverages, tobacco and narcotics (intoxicants) also fell by around 16 percent (in total) in the year of the pandemic. In 2019-20 Indians spent Rs. 1.60 crore on these items which fell to Rs. 1.35 crore in 2020-21.
In this particular section, alcohol spending saw the sharpest decline, falling from Rs.41,7trillion in 2019-20 to Rs.30,000 crore in 2020-21 – a drop of about 26.8 per cent.
Spending on tobacco fell by 17.2 percent and on narcotics (intoxicants) by 2.2 percent.
Compared to 2019/20, expenditure on facilities fell by 13.4 percent, on leisure and culture by 11 percent and on communication by 6 percent.
The category of other goods and services typically accounts for 16 percent of India’s total domestic consumption spending. This segment includes personal care – from bath soaps to salon/salon visits, jewelry, watches, suitcases, etc.
Consumption of these personal care items fell by 4 percent over 2020-21, according to MoSPI data.
Where spending grew
The government’s consumption data estimates have shown that unlike non-essentials, where spending can be deferred or deferred, spending on essentials like food and household appliances has increased during the pandemic.
Consumer spending on food and drink (non-alcoholic) – the whole sector – rose 3.9 per cent during the pandemic year to Rs.23.5 crore in 2020-21 from Rs.22.6 crore in 2019-20.
However, while spending on food rose, consumer spending on soft drinks fell 16 per cent – from Rs. 35,000 crore in 2019-20 to Rs. 30,000 crore in 2020-21.
Among these non-alcoholic beverages, consumer spending on soft drinks, bottled water, fruit and vegetable juices fell by around 28 per cent (to Rs.15,000 crore in 2020-21 from Rs.21,000 crore in 2019-20).
Spending on tea, coffee and cocoa fell by 0.1 percent.
Before the pandemic, consumer spending on food and beverages was growing at an average of 6.52 percent per year (2015-2020), according to MoSPI data.
Among food items, oils and fats saw the largest increase in spending (18.6 percent) in the pandemic year, followed by food items not classified elsewhere (mainly spices) at 9.4 percent.
Consumer spending on animal products has also increased significantly during the pandemic. Spending on eggs increased to Rs. 22,500 crore in 2020-20 from Rs. 21,000 crore in 2019-20. Seafood spending rose 4.8 percent – from Rs 1.27 crore to Rs. 1.34 crore – while spending on meat has risen by 4.4 per cent in 2020-21.
The growth rate of all these items is based on how they were rated in 2011-12. Therefore, spending on these items has not been affected by today’s inflation.
(Edited by Gitanjali Das)
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