Has the slowing economy shaken consumer confidence in India? It would seem so, going by the trend in credit card spending in the first three months of the current financial year (2012-13), experts say.
After a continuous rise in the past four quarters, spending through credit cards have shown a declining trend for the first time. It has fallen by 11% to Rs. 9,039 crore in June from Rs. 10,119 crore in April, according to Reserve Bank of India (RBI) data. The spending had risen during the same period last year, from Rs. 7,055 cr to Rs. 7,191 cr.
Interestingly, though, the number of credit cards has risen in the same period, to 18 million cards in June from 17.77 million in April. Also, compared to the same period in 2011, credit card spending has risen by 28%.
"The spending may be less because of uncertainty in the domestic economy," said Kadambi Narahari, chief executive officer, SBI Cards. "When there is uncertainty, customers postpone their spending and try to save."
Recently RBI had revised downward the GDP forecast for the current financial year to 6.5% from earlier projected 7.3%. Rating agency Moody's and Crisil also cut the GDP growth forecast 5.5%, citing a lack of action from government to speed up the reforms process.
Bucking the trend debit card spending has shown upward movement from Rs. 5,072 crore in April to Rs. 5,179 crore in June.
Experts advise caution against reading too much into these figures.
Seasonality may also be a reason for low spending, they said. "This may be a temporary aberration also because the first quarter is usually a lean season in terms of credit card spending because of no festivals," said Shyamal Saxena, GM (retail banking products) India and South Asia, Standard Chartered Bank.
"In the first quarter, retailers' offers are comparatively less than the other three quarters, which also affects customer spending," said Narahari.
However experts believe the spending will rise in the coming quarters. "The spending will pick up from next month and for the full year, credit card growth is expected to match the previous fiscal, said Saxena.
Credit card spending in India had risen 28% to Rs. 96,000 crore in 2011-12 from Rs. 75,000 crore in the previous fiscal year.
In the first quarter of last financial year (2011-12), credit card spending had not shown continuous decline. Spending through credit cards stood at Rs. 7,055 crore in April 2011, Rs. 7881 crore in May and Rs. 7191 crore in June.