India consumer spending at 7 year lows as slowdown bites

India's consumer spending is at its weakest in seven years, global ratings agency Fitch said on Tuesday, as it cut the outlook for India's vast retail sector from stable to negative.

The announcement was a new blow to the Congress-led government, underscoring the challenges new Finance Minister P. Chidambaram faces in reviving an economy growing at its slowest pace in nearly a decade.

Analysts had been betting on strong retail and financial services sector performances to help power Asia's third-largest economy as India's 1.2 billion people move towards more Western-style consumer spending patterns.

But the slowing economy, due to high borrowing costs and a weak global outlook, have brought "a sustained deterioration in the discretionary spending ability", Fitch said, in an outlook covering the second half of 2012.

India's once-booming economy grew by just 5.3 percent between January and March -- its slowest annual quarterly expansion in nine years.

The Fitch assessment comes two months after it downgraded its overall credit outlook for India to negative from stable saying the nation's prized investment grade rating was at risk from flagging growth and spiralling deficits.

Fitch on Tuesday warned spending was unlikely to pick up unless consumer price inflation, now running at over 10 percent, comes down significantly and consumers receive a "significant raise in real wages".

Allowing supermarkets such as US giant Wal-Mart to enter India's retail sector could provide retailers easier access to foreign investment and have a "positive impact" on their finances, the agency said.

India's government has allowed foreign brands such as Adidas to open 100-percent owned shops.

But it has continued to block the entry of supermarkets amid parliamentary opposition and protests from small shopkeepers, who dominate the retail landscape and fear such a move will cause widespread loss of jobs.

The retail sector is India's second-largest employer after agriculture.

Foreign supermarket groups such as Wal-Mart currently operate as wholesalers in India but have been prevented from selling directly to the public.

Analysts say the government, under Chidambaram, may move to fully open up the retail sector to foreign supermarkets -- allowing them to sell directly to consumers -- as it seeks to push ahead with long-stalled reforms.

Trade Minister Anand Sharma said last month the government was committed to fully opening its retail sector to foreign investors but did not say when the decision might come.

A study, meanwhile, by Indian industry body FICCI held out hope for the longer term, forecasting the retail sector will become a $1.3-trillion market by 2020, up from about $500 billion now.

Turnover of so-called modern or chain stores will increase to $220 billion from $27 billion now, the report forecast.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Militants want US Marines pulled out of Negros
    Militants want US Marines pulled out of Negros

    The militant group Bagong Alyansang Makabayan (Bayan) is calling for the pullout of US Marines who arrived in Sagay City, Negros Occidental last Wednesday to train Special Action Force (SAF) commandos and members of the allied forces. The SAF commandos and the allied forces will secure the Asia-Pacific Economic Cooperation (APEC) ministerial meeting in this city. Bayan-Negros secretary general Christian Tuayon said the US troops might violate the human rights of activists, especially those …

  • Couple married 67 years holds hands in final hours together
    Couple married 67 years holds hands in final hours together

    FRESNO, Calif. (AP) — After spending 67 years together as devoted husband and wife, there was no question how Floyd and Violet Hartwig would end their lives — together. …

  • China subs outnumber US fleet – admiral
    China subs outnumber US fleet – admiral

    China is building some “fairly amazing submarines” and now has more diesel- and nuclear-powered vessels than the United States, a top US Navy admiral told US lawmakers on Wednesday, although he said their quality was inferior. Vice Admiral Joseph Mulloy, deputy chief of naval operations for capabilities and resources, told the House Armed Services Committee’s seapower subcommittee that China was also expanding the geographic areas of operation for its submarines, and their length of …

  • 3 Pinays on Forbes power women list
    3 Pinays on Forbes power women list

    Three Filipina executives, who are all daughters of known business tycoons in the country, made it to Forbes’ list of the 50 most powerful businesswomen in Asia. Teresita Sy-Coson, vice chairman of SM Investments and chairman of BDO Universal Bank, was included in the list for the fourth year in a row since its inception. “Under her (Sy-Coson) lead SMIC became the largest listed company on the Philippine Stock Exchange by market cap. Also in the 2015 list is 70-year-old Helen Yuchengco-Dee, …

  • Pacman mega fight tax exemption up to Congress, BIR
    Pacman mega fight tax exemption up to Congress, BIR

    Malacañang is leaving it up to Congress and the Bureau of Internal Revenue (BIR) to consider a proposed special tax exemption for boxing icon Manny Pacquiao in his much-awaited fight with Floyd Mayweather. Deputy presidential spokesperson Abigail Valte said yesterday it will have to be discussed by Congress because lawmakers are the ones who enact tax exemptions, special or general. Pacquiao has been dogged by unsettled tax obligations with the BIR. …

  • Binay backs house arrest for JPE, GMA
    Binay backs house arrest for JPE, GMA

    Vice President Jejomar Binay yesterday supported proposals to put Sen. Juan Ponce Enrile and former President now Pampanga Rep. Gloria Macapagal- Arroyo under house arrest. “Government prosecutors are opposing house arrest for… Enrile. Binay issued the statement after the 91-year-old Enrile was rushed to the Makati Medical Center on Thursday due to pneumonia. House arrest for him would be the compassionate thing to do,” he added. …

  • Lupita Nyong'o's $150,000 Oscars dress stolen from hotel
    Lupita Nyong'o's $150,000 Oscars dress stolen from hotel

    The $150,000 pearl-studded, custom-made Calvin Klein dress worn by Oscar-winning actress Lupita Nyong'o at this year's Academy Awards has been stolen, police said on Thursday. The gown, embellished with 6,000 natural white pearls, was stolen from Nyong'o's room at the London Hotel in West Hollywood, during the day on Wednesday, a spokesman for the Los Angeles County Sheriff's Department in West Hollywood said. "Ms Nyong'o was not in the room at the time of the theft," Deputy John Mitchell …

  • US-led strikes on IS after group seizes 220 Christians
    US-led strikes on IS after group seizes 220 Christians

    The US-led coalition has carried out air strikes against the Islamic State group in northeastern Syria, where the jihadists have launched a new offensive and kidnapped 220 Assyrian Christians. The raids on Thursday struck areas around the town of Tal Tamr in Hasakeh province, the Syrian Observatory for Human Rights said, without giving information on possible casualties. The town remains under the control of Kurdish forces, but at least 10 surrounding villages have been seized by IS, along …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options