iconimg Thursday, May 28, 2015

HT Correspondent, Hindustan Times
New Delhi, December 21, 2012
A key phase of the festive shopping season is here, and it isn't raining goodies or freebies. Call it the big squeeze or the Christmas freeze: stubbornly high prices, rising interest rates, a weaker rupee and the general economic slowdown have ensured that the Yuletide cheer is missing in India's shopping malls and arcades.

Factories are producing less, exports are shrinking and prices continue to remain high. It is a sombre year-end as consumers struggle with less in their pockets to fund their aspirations

"We had wanted to buy a LED TV but have put it on hold, till don't know when. We had also planned to go in for a new two-wheeler, but are really thinking whether to or not, given the four-fold increase in petrol prices," said Sumati Parama, a Chennai-based homemaker.

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Hemmed in by rising raw material costs and costly borrowings, companies are looking for means to strengthen margins and are raising prices than offering discounts. Consumer goods companies, particularly, appear to have given the practice of year-end discounts this year a complete go-by.

A sliding rupee, which has shed more than 16% in value in the last few months, have hit these companies the worst as imported components have become costlier.

On an average, these companies have increased prices by 8% this year to cover margins and are contemplating another round of price hikes.

"We would not come out with any year-end discount schemes this year," said a top executive at a South Korean electronics goods maker who did not wish to be identified.

The only exception are desperate car makers, whose output contracted 8.2% year-on-year in November. They are offering year-end discounts to boost sagging sales and dispose of unsold older models before 2013 comes to a close.

A leading two-wheeler manufacturer is offering a commission of R750 per bike as commission to its sales executives to boost sales.

The RBI's continuous monetary tightening may have only lately succeeded in taming the price monster, that too in small measures, but forced families to cut down on non-essential expenses.

Costlier borrowings have prompted consumers to defer purchases of goods such as cars that are mostly bought on loans.

In the domestic passenger car segment, sales fell by 8.25% to 1,58,257 units last month from 1,72,493 units a year ago.

The director-general of the Society of Indian Automobile Manufacturers, Vishnu Mathur, said "the carryover" from the previous phase of the festive season was not there. "Market continues to be tough due to the same reasons such as the high interest rates and fuel prices, and low consumer sentiment."

A sustained rise in prices - retail inflation was 9.9% in November despite two years of a monetary squeeze, has hurt family budgets.

"The cost of living is increasing and my salary hasn't kept up, so I have postponed a decision to buy electronic goods," said S Jagannathan, a private sector employee from Chennai.

Clearly, Santa Claus has his arms tied this Christmas.