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Four things to know about the Indian consumption story
Demonetisation and implementation of Goods and Services Tax (GST) may be a thing of the past but it's after-effects have slowed down the Indian economy, according to several economic reports.
Consumption trends, a major driver of the country’s economy, can give us a fair idea about the health of Indian economy. So, here are four features that can reflect India’s consumption story:
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Credit growth
Demonetisation has had little impact on personal loan growth. The Reserve Bank of India says the personal loan segment is rising 14.8% on year-on-year basis. Macquarie Group, a global financial services group, feels that declining income levels in the country may be the reason behind the steady rise of personal loan disbursement.
Peer-to-peer lending, a form of crowd-funding, has also gained traction. More and more individuals and businesses are looking for other ways to raise capital for their business. Instead of going to the traditional lenders, they are now looking at online platforms to stump up capital. KPMG and NASSCOM reports estimate peer-to-peer lending to go past the $2.4 billion-mark (roughly Rs 15,500 crore) in India by 2020.
However, there has been a slowdown in the housing finance department. The demand for home loans has dropped off this year to around 11%. But experts estimate this to change. They are banking on Real Estate Regulation and Development Act (RERA) to improve consumer confidence and drive home loan growth in the coming months.
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Gold demand
The demand for gold has slumped. Stricter compliance like KYC (Know Your Customer) norms and increase in customs duty are some of the reasons for this.
Moreover, World Gold Council doesn’t expect an uptick in demand in the near future. Weak demand in India’s rural areas and rise of other investment options like equity and mutual funds are the main reasons for the fall in demand, according to the Council.
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Rural spending
Mahatma Gandhi National Rural Employee Guarantee Act (MGNREGA), a central government scheme, is an employment generator in rural areas. It does affect rural spending to some extent.
This year, there have been reports of workers not getting their wages. In fact,only 32% -- about one-third of the beneficiaries – have received the payment for the work done by them in the first half of the current fiscal year, according to some researchers. The erratic disbursal of wages under the MGNREGA scheme might have eroded the power of rural spending this year.
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Air traffic
More people flew this year, and that is unlikely to change in the next two years, as per Moody’s, an international rating agency.
The expansion of the middle class, cheaper flight tickets and government’s regional connectivity scheme called Ude Desh Ka Aam Nagrik (UDAN) have contributed to the growth in passenger traffic. This year, domestic air traffic grew by 15%, while international traffic grew by 8-10%, according to government data.
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57.3
Private and government expenditure play a major role in driving consumption. While the role of government consumption is small, private consumption occupies 57.3% share of India's GDP.
