INDIA TOPS NIELSEN CONSUMER CONFIDENCE INDEX YET AGAIN

Increasing food prices continues to be the biggest concern in the second quarter of 2010

25 July 2010, Mumbai, India

Registering a two point increase, at 129 points Consumer Confidence Index was the highest in India in the latest Nielsen Global Consumer Confidence Survey. Indonesia and Vietnam (both 119 index points) followed India in consumer confidence levels.

             However, all is not rosy and a full global economic recovery is slower than anticipated. The global consumer confidence cautiously edged up one index point to 93 in the second quarter as confidence increases in booming Asian markets were offset by European consumers’ growing concerns of an escalating debt crisis, which battered confidence levels in Spain, Italy and France.

             Nielsen’s Global Consumer Confidence Index tracks consumer confidence, major concerns and spending intentions among approximately 27,000 Internet users in 48 countries. The latest round of the survey was conducted between May 10 and May 26, 2010.

            “The positive attitude of Indians comes on the back of a robust GDP growth (9%) in April – June quarter of 2010 after growing by 8.6 per cent in the preceding quarter according to estimates by Centre for Monitoring Indian Economy (CMIE). For the fiscal 2009-10 India's economy grew by 7.4 percent which is an upward revision from earlier estimates of 7.2 percent due to higher-than-anticipated growth in agriculture, mining and manufacturing sectors. In the opening month of 2010-11, growth came from the three sectors, mining, manufacturing and electricity. As per the use-based classification, growth numbers were also found to be remarkable; especially, the capital goods sector, which achieved a growth of 72.8 percent indicating a rise in investment sentiments in the economy,” said Piyush Mathur, President, India, The Nielsen Company.

             Nearly 7 in ten Indians (69%) think that the country is currently not under economic recession. Out of those who think that India is currently under economic recession, 64 percent think that the country will be out of recession in the next twelve months.

Optimistic Indians

Indians emerge the most optimistic globally on all parameters, whether it’s their job prospects, personal finances or attitude towards spending.

            More than nine out of ten Indians (92%) are optimistic about their job prospects in the next twelve months. 26 percent consider their job prospects “excellent” and 66 percent consider it “good”. This is the highest percentage for any country globally where job prospects are considered.

            Indians are also the most optimistic when it comes to their state of personal finances in the next twelve months. 14 percent Indians consider their state of personal finances in the coming year “excellent” and 71 percent consider it “good”. With 85 percent votes, Indians top the list of countries that are optimistic about their state of personal finances in the next twelve months.

           The high confidence levels and state of personal finances give Indians the confidence to spend. 59 percent Indians are optimistic that “now” is a good time to buy the things they want or need over the next twelve months.

           “A steady rise has been seen in the confidence levels of Indians in their job prospects, personal finances and their economy. The cloud of a looming recession has disappeared and Indians are ready to spend. Now the ball is in the court of the marketers and their efforts that will make them a part of this spending kitty,” continued Mathur.

What they do with spare cash?

            After meeting their essential living expenses, Indians love to put their spare cash into Savings. More than six out of ten Indians put their spare cash into savings. This is the most beloved use of spare cash for Indians, who haven’t conceded this spot to any other use for many rounds of this survey. At 63 percent, savings has become dearer to Indians by three percent compared to the last leg of the survey. India ranks seventh globally which puts spare cash into savings.

           After saving, Indians love to put their spare cash in Shares of stock/ mutual funds. Nearly half the Indian consumers (46%) invest in stock. The percentage of Indians investing in the stock market has gone up by three percent compared to the last round of the survey and is the third highest percentage for a country investing in the shares.

           After saving and investing, Indians love to spend their spare cash on Holidays/ vacations (38%), followed by New technology products (36% - 6th highest globally), New clothes (34%), Paying off debts / credit cards / loans (30%), Home improvements / decorating (29%), and Out of home entertainment (28%).

           So we see that Indians are back on a spending spree, with most activities registering a growth except for Home improvements/ decorating, which has gone down by 3 percent.

           Indians are a cautious clan when it comes to planning for their retirement. 23 percent Indians put their spare cash into Retirement funds. This is the fourth highest percentage globally, who put spare cash into retirement funds.

          “The growth in purchase activities is a clear sign that Indians are fast moving away from a recessionary mindset, a major boost to a developing economy like India,” said Mathur.

Major concerns

Increasing food prices is the biggest concern for Indians in the next six months. However, compared to the last leg of the survey, the concern has gone down by four percent to thirteen. India ranks first globally in its concern for rising food prices.

           Indian concern for increasing food prices is followed by their concern for Work/life balance (12%) and Terrorism (12%). Indian concern over terrorism is the second highest globally, behind Turkey.

           The Economy, Global warming, Children’s education and/or welfare (all 8%), Job security and Parents' welfare and happiness (both 7%), are some other concerns bothering Indians. India ranks first in its concern over Global warming.

            “Increasing food prices is a major concern that has been bothering Indians for some time now. The overall inflation averaged for the month of April 2010 stood at 9.6 percent as compared to the inflation of 1.3 percent seen in the same month of previous year. This rise in price index is on account of dearer food articles and fuel products. The concern over increasing food prices has become so big that it has replaced consumer concern over jobs and economy. Concrete steps needs to be taken to curb the increasing prices, if India has to retain its consumer confidence level,” continued Mathur.

McKinsey: India’s “Urban Awakening” Depends on Sustainable Transport and Land Use

“If India continues with its current unplanned urbanization path, it will result in a sharp deterioration in the quality of life in its cities, putting even today’s rates of economic growth at risk,” says an April 2010 report published by McKinsey & Company.

Despite this daunting tone, McKinsey highlights many of the urbanization “opportunities” for India to seize by 2030, including the following projections:
■590 million people will live in cities
■70% of net new employment will be in cities
■68 cities will have a population of 1 million or more (up from 42 today)
■700-900 million square meters of residential and commercial space needs to be built – the size of the city of Chicago
■2.5 billion square meters of roads will have to be paved, and 7,400 of metros and subways will need to be constructed – both equaling 20 times the capacity added in the past decade
But in order to meet the increased demand associated with this growth, the country will need to focus its efforts on improving mass transit, developing comprehensive land use plans and providing affordable housing, especially for low-income people. Here, we summarize some of the main transport-related recommendations.
McKinsey says “India’s planning is in a very poor state.” Its plans “are esoteric rather than pratcial, rarely followed and riddled with exemptions. For example, no city in india has a proper 2030 transportation master plan.”

The Context

Indeed, the country struggles with many strains on its roads:

■The share of public transportation has declined from 40% in 1994 to 30% today.
■Meanwhile, the number of private cars has skyrocketed. Peak private vehicular density is already 170 vehicles per lane kilometer – 50% higher than the basic requirement. This is only going to increase, likely reaching 610 vehicles per lane kilometer, which means that average journeys could take up to five hours in peak morning traffic! This is a severe threat to “urban productivity.”

The Solution

McKinsey calls for more intercity mass transit, especially rail-based and bus rapid transit, aiming for a 50% share of public transit in urban India by 2030. McKinsey estimates this would require a dramatic boost in infrastructure, which includes:

■Building 35 rail-based mass transit systems, totaling 8,400 kilometers of track in the country’s biggest cities
■Constructing 8,000 kilometers of BRT in 68 cities of more than 1 million people
■A fivefold increase in the number of buses
■Constructing 900,000 lane kilometers by 2030 to accommodate additional journeys by private transport
■Building 350 to 400 kilometers of metros and subways every year, more than 20 times the capacity of what has already been built in the past decade
■Building 19,000 to 25,000 kilometers of road lanes (including BRT lanes), which is equivalent to the length of road lanes constructed over the past 10 years

McKinsey seems to think that India can emulate countries like China, which has faced similar challenges, and eventually create a “mature urban planning regime that emphasizes the systematic redevelopment of run-down areas in a way that is consistent with long-range palns for land use and transportation.”

Bank of India brings in Mckinsey for revamp, growth road map

Public sector lender Bank of India has brought in global strategic consultancy firm McKinsey to advise on organisational restructuring and charting a road map for business growth in the next five years.


A senior bank official said the preliminary report would come in three months.

Seven consultants, including Ernst & Young, Boston Consulting Group and McKinsey, had expressed interest in the job. Elaborating on the need for external advice and appointment of McKinsey, a senior BOI official said: "The business scenario has become competitive. We have to frame business plans on (our) strength and improve on risk management and recovery."

While the bank has wide access to information due to its core banking platform and other programmes, "there is need for intelligent exploitation of data and information about consumer behaviour", said a senior official.

Mumbai-based BoI is the fourth public sector bank to engage McKinsey for consultancy. State Bank of India [ Get Quote ] had done so for revamping its corporate and wholesale banking business.

At present, MsKinsey is helping the country's largest lender in reworking the processes for rural banking.

Following its recommendations, the corporate banking business in SBI was revamped to set up corporate accounts to look after large companies. It also formed another unit, a mid-corporate group, to focus on mid-size entities.

This sharper focus helped to assess emerging funding and non-fund-based needs for companies and the offering of services, including treasury solutions.

Last year, Bank of Baroda [ Get Quote ] had commissioned McKinsey for its business process re-engineering advisory services. IDBI Bank had asked it for help in remap of branches, re-engineering processes and refocusing business.

BOI has aimed to grow its business to about Rs 12,00,000 crore (Rs 12,000 billion) in the next five to six years from about Rs 4,01,000 crore (Rs 4,010 billion) at the end of March. It plans to implement BPR initiatives to streamline its growing business.

The bank saw a change of chairman and managing director in the early part of 2009-10. Alok Misra, career BOI officer, took the reins in the second quarter of FY10.

After three years of breakneck growth, it hit a rough patch in 2009-10, with a sharp rise in non-performing assets. Its gross bad loans more than doubled to Rs 4,882.6 crore (Rs 48.82 billion) at the end of March, from Rs 2,470.9 crore (Rs 24.7 billion) a year earlier.

BOI officials attribute much of this increase in bad loans to the adverse effect of the global financial crisis on corporate borrowers. Higher provisioning for non-performing assets made a big dent in its net profit.

It reported a 42.1 per cent drop in net profit for FY10, at Rs 1,741, from Rs 3,007.3 crore (Rs 30.07 billion) for 2008-09.