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Indian consumers cut down on discretionary spend - Credit Suisse

January 31, 2013 11:19 IST

Indians are cutting down on discretionary purchases like apparel, electronics and automobiles as consumer optimism in the country is on a decline, according to an emerging markets consumer survey report by Credit Suisse.

High inflation and slower growth continues to worry Indian consumers with more people expecting lower salary increases, said the survey, which interviewed 2,602 respondents across 10 cities and rural areas in India.

This is in sharp contrast with other fast-growing economies like Indonesia, where the increase in minimum wages is likely to keep consumer sentiment robust, and in China, where sentiment remains strong on the back of purchases by consumers from lower income groups, the report released on Wednesday said.

"There are signs of down trading in discretionary items in India. Fewer people are buying smartphones and more now want to buy an entry-level car," said Arnab Mitra, research analyst with Credit Suisse.

"More and more consumers are postponing big-ticket purchases.. This situation will take more than a couple of quarters to improve," he said.

Last week, investors knocked down shares of India's largest consumer company Hindustan Unilever by 5 percent after the it reported weak volume growth as consumers cut purchases of products such as packaged foods and personal care items.

The report, however, said the long-term growth potential in India remained intact due to low product penetration in most categories.

Nandita Bose in Mumbai
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