Feeling the Pinch

Call it irrational exuberance or rational expectations .Urban Indians continue to be reasonably optimistic about the state of the economy and as high as 75% of them expect their family’s financial situation to remain stable or improve over the next 12 months. This is so, even as a majority of them acknowledge that the economy is doing badly at present. Expectations of this kind determine spending behaviour and that is why the pervasively gloomy mood in most developed markets has industry and economists worried. The mood in India, in contrast, is positive, finds a 14-city survey of 2,900 reasonably well-informed and well-off people. The survey was conducted by Futures Company and TNS Global as part of its ‘Feeling the Pinch’ series, previous editions of which covered the UK and the US. About one in every three persons in urban India is not worried about economy at all. A little over 53% expect their finances to remain the same while over 21% expect their finances to improve over the next 12 months. However, worries about their financial stability have risen over the past three months. Less than 20% said that they are facing financial difficulty, while more than 38% said they were financially comfortable or well off and 41% said they have enough to make ends meet. That confidence emanates from the level of savings respondents have accumulated over the years, says Rima Gupta, Country Head, The Futures Company. After all, with the economic boom of the past few years, more than 50% feel they were better off than they were three years ago. But that’s the broad trend. The survey of people in the SEC A, B, and C categories (socio-economic classes that are clerical/supervisory staff and above), conducted in January, however, saw divergent trends. Individuals in metro cities were slightly more pessimistic about the economic outlook than their non-metro counterparts. That can probably be attributed to the impact of external factors on metro residents. They were more affected by the stock market collapse, the Satyam episode and the Mumbai terror attacks. In contrast, people in the smaller towns were more preoccupied with mundane matters such as meeting expenses for basic necessities, impact of prices and paying for children’s education. They have gained from inflation cooling off. About 71% of those living in metros said the economy was doing badly or fairly badly compared 61% in the non-metros. Further, 36% in non-metros felt the economy was performing well or fairly well against 28% in the metros. Yet, the sudden change in the economic climate in the country had majority of the people concerned about their financial situation. Only a little more than 13% said they had not become more worried about their financial situation over the three months preceding the survey. The anxiety level was higher among the non-metro dwellers, with nearly 64% saying they somewhat more or a lot more worried now, perhaps due to the nature of their concerns and greater fear of losing their job due to the slowdown. Small-town folk came across as more confident, with more than 82% saying their family’s financial position would be about the same or better over the next 12 months.