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Press Releases

Tumbling Rupee Hurt the Middle income group: ASSOCHAM; (Weak rupee tighten purse strings)
Thursday, June 20, 2013

Middle Income Group (MIG) has been impacted by inflation particularly in context of falling rupee and its cascading effects on price rise of petroleum products, edible oil, higher foreign education, foreign trips to extent of 15-20% to manage their household budgets, according to the survey by apex chamber ASSOCHAM.

The quick survey was conducted by ASSOCHAM in major places like Delhi-NCR, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabd, Pune, Chandigarh, Dehradun etc. A little over 200 employee were selected from each city on an average. The survey reveals that the cascading impact of rupee falling has hit even the middle income group to extent of 15-20% particularly on items related to petroleum products, edible oil, higher foreign education, foreign trips etc.

ASSOCHAM nationwide survey reveals that rupee depreciation impacted the most, consumers in metros and other major cities Vis-à-vis tier-III and semi urban area. Over 92% of the respondent said that their monthly bills have jumped by 15-20% in the last one month. The middle class and the lower class are the worst hit, adds the survey.

“Despite the effort by the government to control gold imports, the Indian middle income group is bound by societal traditions and continues to buy gold even at higher prices which have increased the prices of gold due to rupee weakening”, said Mr. D S Rawat, Secretary General ASSOCHAM.

Around 55 per cent of the survey respondents fall under the age bracket of 20-29 years, followed by 30-39 years (26 per cent), 40-49 years (16 per cent), 50-59 years (2 per cent) and 60-65 years.

 

The survey was able to target employees from 18 broad sectors, with maximum share contributed by employees from IT/ITes sector (17 per cent). After IT/ITeS sector, contribution of the survey respondents from financial services is 11 per cent. Employees working in engineering and telecom sector contributed 9 per cent and 8 per cent respectively in the questionnaire. Nearly 6 per cent of the employees belonged from market research/KPO and media background each. Management, FMCG and Infrastructure sector employees share is 5 per cent each, in the total survey. Respondents from power and real estate sector contributed 4 per cent each. Employees from education and food& beverages sector provided a share of 3 per cent each.

 

Consumers' growing unease is reflected in their saving and spending habits, with many middle and lower income groups indicating that they are finding ways to cut back spending now or indicating they will do so in the future, added Mr. Rawat.

 

The weakening rupee has made crude oil, fertilizers and iron ore, which India imports in large quantities, costlier. Though these items are not for daily consumption, but impact the finances indirectly, said Mr. Rawat.

The survey further reveals, the crude palm oil prices set the pace for prices of other edible oils. It is imported in large quantities and any rise in its price will add to the inflationary pressure. 
ASSOCHAM nationwide survey revealed that Middle Income Group, uncomfortable with weak rupee and are changing their overall spending habits including dining out, vacations, electronics etc.

The falling rupee will also impact itinerant Indians and vacationers to a foreign country. The air fares are going up, the foreign stay will be costlier by at least 15-20% while shopping can become expensive by 12-15%. Eating out will also be costlier by 5-8%, adds the survey.

There are certainly some changes in travel patterns' as majority of them are opting for non-dollar destinations such as Sri Lanka, Dubai, Bali and Phuket or sticking to domestic destinations such as Kashmir, Kerala and Goa, adds the ASSOCHAM Survey.

As per the ASSOCHAM estimates, Indian students paying fees in US currency will have to arrange for more rupee funds for the same amount of dollar fees. Since March 2012, rupee has weakened by 15%, reflecting the higher cost that students have to pay now compared to last year. Indian students who are going abroad for their higher education will see a high expenditure due to falling rupee on their food, living expenses and stay cost.

Electronic consumer goods such as computers, televisions, mobile phones, etc, with imported components will also become costlier. International food chains which run outlets in India are not denying the impact on profitability.

ASSOCHAM findings are as follows

  • Average monthly expenditure has increased by 15-20%
  • 78% have decreased spending on International food chains and rest preferred on occasions.
  • 65% decrease in the amount they spend on foreign brands.
  • 77% percent indicated fall in the amount they spend on foreign vacations.
  • 49% plan have decreased the amount they spend on home appliances; 44%  for home and personal electronics; 32% for automobiles; 

 

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