India's consumer companies which were counting on the festive season from September till December to spur sales are facing a grim situation now with free-falling rupee forcing consumers to check their spending.
The currency blow is landing just as consumer companies look toward a boost from their strongest annual sales period, which starts in September with Ganesh Chaturthi, followed by Diwali and then Christmas. Indian companies say they can't plan more than a couple of months out as a fast-falling rupee currency drives up the cost of imports, forcing them to raise prices even as consumer spending crumbles.
India's consumers, whose spending helped see the country through the global financial crisis in 2008, are closing their wallets, squeezing companies from car-makers to shampoo sellers. Companies that import finished goods or raw materials are the worst-hit as they scramble to hold onto margins while balancing the need to raise prices without deterring buyers.
"We are now planning for a month or three months at best unlike six months or a year earlier," said Shantanu Dasgupta, vice-president for corporate affairs and strategy at Whirlpool India, the local arm of Whirlpool Corp, the world's largest home appliance maker.
India's total consumption expenditure, which includes private and government spending, grew 3.3% in January-March 2013 from 9.3% in the same period a year earlier, according to government estimates.
Total consumption expenditure as a share of the country's gross domestic product fell to 65.9% in the fourth quarter of 2012/13 from 72.1% in the first quarter of the same fiscal year.
Indian shoppers are not only cutting back on big-ticket purchases such as refrigerators, TVs or expensive branded apparel but even staples including soaps, ketchup and cosmetics. A survey by the Associated Chambers of Commerce and Industry in June found monthly bills for the middle class jumped by 15 to 20% in a month across major cities as the falling rupee drove up prices of petroleum products and edible oil.
A paper in August by the same group found that even deep-pocketed consumers were cutting back, with five-star hotels and fine dining restaurants registering a decline of 20% in sales in the past three months after prices of imported food ingredients and spirits rose.
Makers of consumer goods are also feeling the pinch, with market leader Hindustan Unilever Ltd posting lower sales volumes for a fifth consecutive quarter in the June period.