New Delhi, December 10, 2024 – Despite managing financial challenges better than many global markets post-pandemic, Indians remain concerned about rising costs, particularly in food, utilities, and household shopping, according to the latest Ipsos Cost of Living Monitor for November 2024.
A Stronger Recovery than Global Peers
India has fared relatively better in the wake of the global cost of living crisis, with its population largely shielded from the most severe impacts. According to the survey, India’s inflation rate has been among the lowest globally, and its population has benefitted from government support programs such as free rations, subsidies in government-run medical clinics, and Ayushman Bharat health initiatives. Amit Adarkar, CEO of Ipsos India, highlighted these measures as helping the masses cope with cost pressures.
Despite the relative stability, 22% of Indians fear a decline in their disposable income over the next year, and 62% anticipate food price increases. While these numbers reflect concerns, they also illustrate that India’s domestic consumption-driven economy and population dividend have insulated it from the worst effects seen in many other countries.
Financial Confidence and Post-Pandemic Recovery
The survey indicates that 19% of respondents report living comfortably, while 34% claim to be doing alright. Around 40% of urban Indians feel they are financially better off than during the peak of the Covid-19 pandemic in 2020, while 22% believe their financial situation has worsened. This resilience is partly due to the country’s relatively low inflation rate compared to the global average.
However, concerns about inflation persist, with 45% of respondents skeptical that inflation will return to normal, even as 54% of urban Indians expect inflation to rise further in the next year. This sentiment aligns with 65% of global citizens who share similar concerns about future inflation.
Household Expenses Expected to Rise
The survey suggests that 45% of Indians are worried that inflation will never normalize, and they expect household expenses to increase. Among key spending categories, the following are anticipated to see the most significant price hikes in the next six months:
- Food Prices: 62% expect an increase.
- Utilities (Gas, Electricity): 61% predict higher costs.
- Household Shopping: 61% foresee rising expenses.
- Fuel (Diesel, Petrol): 59% anticipate price hikes.
- Socializing (Cinemas, Cafes, Restaurants): 56% expect increased costs.
- Rent/Mortgage Costs: 56% foresee rises, higher than the global average of 44%.
- Subscriptions: 53% predict higher subscription costs.
Key Drivers Behind Rising Costs
The survey identified several factors contributing to the rise in living costs, including:
- Workers Demanding Pay Increases (55%)
- Excessive Business Profits (54%)
- High Interest Rates (53%)
- National Government Policies (52%)
- Russian Invasion of Ukraine and its Global Consequences (52%)
- Immigration into the Country (51%)
- Lingering Effects of the Covid-19 Pandemic (50%)
- Overall State of the Global Economy (50%)
The global economic environment, including geopolitical tensions and ongoing inflationary pressures, continues to affect household budgets and discretionary spending. Amit Adarkar also noted that the wars in Ukraine and Gaza have further complicated global economic recovery, exacerbating price increases in essential commodities.
Household Investment Shifts
Amid rising costs, Indian households are adjusting their investment strategies. According to the survey, there has been a noticeable shift toward equities, both directly and through mutual funds, particularly post-pandemic. This change reflects growing confidence in the stock market as an alternative to traditional deposits, which have become less attractive amid rising inflation and relatively low interest rates.
Inflation Outlook and Government Responses
Despite a recent dip in retail inflation, which fell to 5.53% in November 2024 from 6.21% in October, the Reserve Bank of India (RBI) maintained its interest rate at 6.5%, signaling caution. The RBI also downgraded its growth forecast for 2024-25 from 7.2% to 6.6%, while anticipating inflation to ease in the first quarter of 2025. However, Indians remain skeptical, with a significant portion of the population expecting inflation to persist or even rise further.
Conclusion
While India has shown resilience in managing the post-pandemic cost of living crisis compared to other countries, concerns about rising household expenses, particularly in food, utilities, and fuel, continue to dominate. The Ipsos survey highlights the mixed sentiment among Indians regarding inflation, with many still uncertain about the future and how government policies will address the challenges of rising living costs.
As the year progresses, the government will need to balance fiscal measures carefully, especially in light of rising demand for social services and ongoing concerns about the cost of living. The Ipsos survey also underscores the importance of addressing both inflationary pressures and economic inequalities to ensure the long-term stability and prosperity of India’s economy.
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