Indica Research's Executive Director, B. Narayanaswamy

The BT-Indica research index in January 2003, as it stands at nearly 17, provides three pointers when compared to where the BT-IRICS stood in September, 2002-at 12.

• A clear movement forward towards optimism.
• When deconstructed, a pronounced shift in the feelings on both the economic conditions as well as the economic expectations. The feeling is clearly upbeat on financial conditions now and next year, income situation now and going forward.
• Buying expectations, after adjusting for the festival season factor in September 2002, has not changed, however. If anything, the preference to save is marginally up.

Does it mean that it should perhaps be called a 'Saver Confidence' rather than 'Consumer Confidence'?

In our view, both are interconnected by a third variable: the need to save in order to enjoy a lifestyle later. We note just two drivers here:

• SEC a and b, the top-of-the-scale consumers, can expect to live longer than the average expectancy, which itself is increasing. So a prolonged period of 'cloudy days' needs to be planned for, and not just a 'rainy day'. A much wider set of options are now available via a privatised insurance sector to do this.
• There are other imperatives-be it the child's wedding or higher education or health-related expenditure. The benchmarks of what is 'good' are changing-and becoming more expensive. We note a significant increase in the options available here too, both as a cause and as a reflection of the shift.

The Budget would be an important event, and can propel the economy forward and energise consumption. The consumers are equally divided on whether it would be better or worse or same as the last year's budget; further tinged with the disquiet, where nearly half of them expect personal income tax to increase.

As we write this, the Iraq War is losing salience to the Cricket World Cup. Cricket, and our team's performance, may well ultimately turn out to be an economic lever in more ways than one.

The Methodology

Consumer confidence measures the mood of consumers towards buying, and helps predict buying patterns. There is no rigorous metric in India available to decision-makers in the corporate sector or the government.

The BT-Indica Research Index of Consumer Sentiment (BT-IRICS) is the country's first-ever consumer confidence index. This is the second of a series, planned to be done every quarter.

Totally 1,108 respondents were met across nine cities.

The questionnaire covered three core areas: Current assessment of economic situation, expectations, and the consumption mood. The metrics reflecting the customer's expectations of economic situation have been given a higher weightage than assessment of current situation and expected consumption.

All data was weighted. Each of the variables was then first indexed for net optimism. Only in the case of price, expecting the price to remain the same has been considered an optimistic response.

The data was then indexed as proportion of total score possible. This index was then weighted to arrive at All India Index of Consumer Confidence. The index minimum is 0 if all were to be pessimistic: and the maximum it can be is 100 at complete optimism. Anything above 50 is optimistic.

NUMBERS, STILL...
...or why positive sentiment hasn't really translated into sales.

Look, don't touch: Consumers are still cautious about spending freely

Here's another paradox Indian marketers have to live with: most consumers believe this is a great time to buy houses (one reason being the attractive interest rates on housing loans) and consumer durables (there are several promotions on). Yet, the housing market isn't exactly hot and the sales of CTV sets haven't looked up much, even in the run-up to the Cricket World Cup. ''The customer is sort of upbeat, yes,'' admits Ravi V. Malwani, Managing Director of Bangalore-based retailer Kemps Fort, ''but she is in no mood to throw money at anything and everything.'' For all of 2001, and much of 2002, all the Indian consumer heard was a tale of doom-of how the Indian economy would either explode, or implode. Neither happened. That could explain why most consumers are moderately sanguine about larger issues. However, circa February, their expectations of a salary hike in 2003-04 and a business-, investor-, and consumer-friendly budget are still just that, expectations. Business confidence, riding on a corporate revival and a boom in exports, is up. That, in turn, has translated into a similar sanguine feeling among consumers. For that to turn into demand, though, their fears regarding taxes, salaries, and prices, need to be addressed. In effect, when consumers say "we need to save more", they are actually articulating a feeling that they really do not need to spend. That reflects poorly on economic policy and marketing strategies-both the government and marketers have failed to stimulate demand. The colour television market, for instance, has seen little innovation. All it has seen (and is seeing) are expensive promotions associated with the World Cup.

PUSHING THE ENVELOPE
If marketers don't give consumers reason to buy, they simply won't.

Look at the numbers closely: the Indian consumer is less pessimistic, not optimistic yet, and very very confused. The context is perfect for marketers to step in and fight consumer apathy and fear. They need to lock consumers into a long-term commitment, or offer attractive inducements that expand markets. "The driver for growth, in terms of excitement, is missing in the case of consumer durables," says R. Ravi, Head (Sales), Godrej Appliances. Especially while selling second-order durables, lifestyle changers such as entertainment systems, marketers cannot just bank on the absence of consumer gloom-they need to create a delight-factor that makes consumers take the bait. Promotions are still relevant. It is no longer possible to expand markets for some categories that are close to saturation point-a freebie may be the only card marketers have left to play in such markets. Even in these categories, however, companies can benefit by adopting a 'lots more for a little more approach'. ''Consumers are actually leveraging discounts and promotions to trade-up,'' says Nabankur Gupta, Group President, Raymond. That means consumers may actually buy a premium brand of jeans at a discount sale for Rs 1,000, instead of paying Rs 850 for a regular Indian brand. Behind all the numbers constituting this survey is a message for marketers: go out there and build your brand. Advertising, promotions, discounts-brand-building takes more than all of these.

PINK SLIP TERROR
Concerns over job security cloud an otherwise clear horizon.

Work this out for yourself: most consumers believe the future has better things in store for businesses and individuals, and that salaries will head north in 2003, yet, they are worried about the ability of the job market to rebound. Behavioural experts attribute that to the tendency of respondents to answer queries regarding jobs at a very personal level. "The feeling is, if it (layoffs) happened once, well, it can happen again," says Anand Narasimha, Executive Vice President (North), Saatchi & Saatchi. It hasn't helped that every time things appear to change for the better, something or the other happens: 9-11, the attack on Parliament, threat of an Indo-Pak war, Gujarat, drought, and now, the imminent disturbance in the Gulf region. Worse, says Vivek Badrinath, Managing Director, Thomson Multimedia India: "Traditional sources of (job) optimism in terms of software and BPO are plateauing." The uncertainty over jobs, then, is very real, unlike fears that prices will increase a natural consumer response across the world. For the record, prices of cars, two-wheelers, and consumer durables have consistently headed south in India.

HOW WE DID IT

» Total sample: 1,108

» Cities covered: Delhi (122), Mumbai (140), Chennai (120), Bangalore (124), Kolkata (118), Ahmedabad (119), Lucknow (126), Coimbatore (120), and Kochi (119)

» Purely random sampling process; Male (571), Female (537); SEC A (550), SEC B (558)

» Age wise break-up of respondents: 20-35 years (514), 35-45 years (379), and 45 years plus (215)

» Face-to-face interviews using a structured questionnaire

» The questionnaire covered three core areas: current assessment of economic situation, expectation about the future economic situation, and overall consumption mood

» Besides key variables for indexing, the survey also measured explanatory measures

» All data was weighted; each variable first indexed for Nett optimism

» Data then indexed as proportion of total score possible

» This index then weighted to arrive at All India Index of Consumer Confidence

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