Indian households are spending 18% more due to inflation: Kantar

Indian households spent 18% more in the March quarter of 2024 than in the June quarter of 2022, on account of rising inflation, market research firm Kantar said in a note on Friday.

June 2022 was the last quarter in which Kantar did the last round of this survey, covering nearly 6,000 households across the country. Kantar follows a calendar year.

An average household spent ₹49,418 in the first quarter of 2024. While Urban households spent ₹64,583, the same stood at ₹41,215 for rural households. Urban households, in general, spent 1.6 times more than rural households.

Less affluent households spent just about ₹38,000 quarterly, showed the Kantar tracker that covers spending on groceries, fruits and vegetables, utilities, education, commuting, fashion, rent, etc. 

Groceries are the biggest household expense, accounting for over 24% of all quarterly expenses in a household. Overall, expenditure on the category increased 19% since Kantar's last round. The jump in household expenditure translates to a quarterly increase of ₹2,000.

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The average monthly per capita household expenditure stood at ₹3,773 in rural India and ₹6,459 in urban India in 2022-23. At an all-India level, monthly per capita household expenditure in urban areas is 71% more than that of rural areas, according to the Consumer Expenditure Survey 2022-23 by the ministry of statistics and programme implementation.

Brunt of inflation

Indian households have been bearing the brunt of high inflation since the outbreak of covid-19 as prices of daily essentials and packaged goods surged due to the pandemic-induced supply-chain disturbances. For instance, average inflation climbed to 6.7% in 2022, up from 5.13% in 2021. It was 6.62% in 2020. The inflation moderated to 5.49% in 2023.

A total of 16% of households surveyed in the March quarter of 2024 said the were comfortable with their financial situation.

However, 34% households reported that they were finding it difficult to manage their expenses—indicating a third of India is still reeling under severe financial stress.

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Kantar pointed out that struggling households are present across socio-economic classes. While in the upper New Consumer Classification System (NCCS) A and B, the percentage of those struggling decreased from 32% to 28%, in the lower NCCS, i.e., C, D, and E, the percentage increased from 35% to 40%.

The NCCS is a socio-economic classification used to map household expenditure and consumption habits across different income-classes in India.

"To sum up, yes, the worst of inflation is behind us, however, there are pockets of the market that are still under some stress, however, the shopper is looking at the future with great optimism, even those who are under stress, and this optimism has been the flagbearer of the Indian consumption story for long now,” said Mahima Bhatnagar, group account director, Worldpanel by Kantar.

The market research firm conducted the first round of the study in June 2022, a prices shot up globally due to the covid-19 pandemic-induced supply-chain disturbances. The second round was carried out in March 2024.

The southern part of the country emerged as the highest spenders, having increased spending by 35% in the last two years. Spending in the North zone, which was the highest spender in 2022, slipped largely due to the share of utilities spend dropping from 16% to 9%. 

“Since the survey period is Q1 2024, lower use of air-conditioning could be a major factor in the lesser utility outlay. This indicates that winters are relatively low-expense periods in the North, and FMCG (fast-moving consumer goods) players can possibly make use of this time,” Kantar said in the note. 

Effect on FMCG sales

Companies, on the other hand, have been feeling the impact of inflation on household consumption. In its recent earnings call for the March quarter, Hindustan Unilever Ltd (HUL) pointed to the impact of inflation on rural households over the past few years; this led to moderation of consumption, in India’s villages. However, the company’s management pointed to “gradual recovery” across markets.

“Over the last few years because the inflation or price increases are quite sizable, they had an impact on rural areas especially as it came through covid and inflation shocks, but I think we are seeing gradual recovery, we are hopeful of a better monsoon and monsoon does have an impact as we all know. It might not be the only impact, but it has an impact on the agri economy and therefore rural consumption,” Rohit Jawa, chief executive officer and managing director, HUL said during the company's post-earnings call.

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“Most likely, the worst is past us and from here onwards we do see gradual recovery in rural consumption and of course as we said the urban consumption has been more resilient especially at the premium end,” he said.

To be sure, retail inflation dropped marginally in the early months of 2024-25.

Retail inflation based on the consumer price index (CPI) fell to 4.75% in May from 4.83% in April, touching the lowest in a year, Mint reported in June citing data from the statistics ministry. The moderation was aided by a slower rise in prices of food items such as meat, fish, milk products, vegetables and spices. Inflation has stayed below 5% since March.

However, food inflation, which accounts for nearly 40% of the overall consumer price basket, rose 8.69% year-on-year in May, compared with 8.70% in April.

Food prices have remained elevated for over a year now, primarily due to last year's uneven and below-normal monsoon rains. Food inflation has consistently stayed above 8% since November.