India’s retail recovery tipped to extend to 2022

Real household spending is not expected to hit pre-pandemic levels by 2021.

The recovery of the consumer and retail sector in India is expected to spill over into 2022, as real household spending is tipped to remain below pre-pandemic levels despite projected growth in 2021, according to a report from Fitch Solutions.

Real growth in household spending in India is projected at 9.1% YoY, marking the start of a recovery from the 9.3% contraction estimated over 2020. However, real household spending is expected to reach $1t (INR73.3t) in 2021 compared to $1.1t (INR74t) in 2019.

In 2020, consumer confidence fell to a five-year low of 49.9 (September) and 97.9 (May) for the current situation index (CSI) and future expectations index (FEI) respectively. The poor consumer demand has impacted credit growth as people postponed non-essential spending.

In March, India's CSI declined slightly to 53.1, after displaying a promising upward trend between the five-year low in September 2020 to 55.5 in January 2021. Similarly, the FEI dipped from 117.1 in January 2021 to 108.8 in March 2021, indicating that consumers hold a gloomy outlook of the current and short-term economic situation.

Further, a new wave of COVID-19 infections in India that started in March will weigh heavily on consumer spending recovery in 2021, but with new daily cases now declining and authorities looking to relax restrictions, Fitch holds a cautiously optimistic outlook that consumer spending will start to build up in the second half of 2021.

“However, we note that a resurgence of community transmission will pose a risk of delay in the recovery, particularly if lockdowns are reintroduced nationwide and consumers delay purchases to reduce health risks,” the report added.