High inflation due to supply side pressures was one of the biggest pain points of 2021 globally. India also came into play with expensive vehicle fuel, with gasoline and diesel crossing €100/litre in several cities. Households bore the brunt as wallets came under stress. Up to 76% of urban Indians think their household spending increased in 2021, up sharply from 57% in 2020 most recently YouGov Mint CPR Millennial Survey has found.
Various items of expenditure, some of which were essential, came under pressure. Most people reported increased spending on groceries, utility bills, transportation, and health care. Each category became significantly more expensive in 2021 than in 2020. Fuel costs increased for 75% of respondents, more than any other item.
No wonder, then, that when asked to rank spending by how tight their budgets were, it turned out to be the worst villain. But the impact varied by income level. Lower monthly income made it more likely to struggle to pay essential bills, while wealthier groups were more likely to be impacted by rising medical expenses and the cost of luxury and consumer goods.
The last round of the semi-annual survey included 12,900 respondents in 206 cities from November to December 2021. It was the seventh such survey conducted jointly by the Indian arm of global market research firm YouGov, Mint, and the Delhi-based Center for Policy Research (HLW). Approximately 45% of the sample were millennials, a third were post-millennials (aged 18-24), and the remainder were pre-millennials (40+).
income is no consolation
Ahead of next week’s Budget 2022, poll results offer a disturbing insight into how the first and second waves of Covid-19 have left a long trail of income and inflationary pressures on Indian households.
Almost 60% of respondents attributed their growing budget to an increase in the cost of living. But another reason for the crisis could be income redistribution – and its gross inequality. People who were already earning less were much more likely to see further pay cuts over the past year. On the contrary, almost half of those on high incomes saw wage increases, compared to only 29% of those in the lowest income bracket.
In addition, a sizeable minority of respondents across all income brackets – around 40% – said their monthly earnings had not changed.
This shows how the poorest in India’s income pyramid have been particularly hard hit by inflation. Although employment figures have improved since the first lockdown, hardship has not gone away completely and remains uneven.
Financial problems
Most respondents (81%) said they faced some financial difficulty in 2021 and the main explanation can be traced back to inflationary pressures. The less you earn, the greater the chance of getting into financial trouble.
The biggest casualty of these inflationary headaches has been the ability to sustain planned savings and investments, with 44% of the 7,869 employed respondents saying they struggled to do so. As savings are a hedge against future crises, the impact on household purchasing power could persist into 2021 unless incomes rise significantly.
There are hardly any rays of hope: while two out of three respondents expect incomes to rise in the coming year, low earners are more likely to expect incomes to fall (12%) than high earners (6%). Worse, income insecurity will last longer: 84% of those whose incomes rose in 2021 expect it to rise further in 2022, but among those whose incomes fell only 47% expect an increase.
purchasing power
The pandemic has quenched appetite for big purchases like real estate or a car. While 22% of respondents planned to buy a home within a year of the 2019 survey, the proportion fell to 15% in 2020 and improved only slightly to 16% by the end of 2021. For cars, the proportion was 30% in 2019, followed by 21 %% and 22%. Not much has changed in terms of appetite for a two-wheeler.
The new reality of working and learning from home has shifted the focus to e-shopping. One in three respondents plans to buy a gadget or laptop in the coming year. Purchases of other consumer discretionary are expected to be limited similar to 2020.
The evidence of inequality in Indians’ perceptions of inflation poses a challenge for policymakers as they wade through the lingering household hardship left in their wake by the pandemic.
This is part four of a five-part series on data journalism based on the biannual YouGov-Mint-CPR Millennial Survey. The final part will appear on February 9th.
The first part focused on the large labor market exodus over the past year, the second part looked at the rising trend in investment among young Indians, and the third part examined the political partisanism penetrating urban India.
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