Just Roti and Makaan, Stupid !!

VMR Economy Survey – Jan’20

  • VMR conducted a nationwide stratified survey of about 5,000 citizens to understand what the purported economic slowdown meant to them
  • A key indicator of the downbeat mood in the economy is the perceived unaffordability of day-to-day goods, an indicator of the growing aspirational lifestyle of individuals
  • Enhancing middle bracket incomes and giving them larger confidence to spend their rupee would do a greater service to the economy

Just Roti and Makaan, Stupid !!

Poll on poll indicates that the Modi government still remains the most popular government of the day, yet poised to win a Lok Sabha election if it may come. However, in the same breath they point out to many agreeing that this could be India at its Economic nadir.

In the months of December and January, VMR conducted a nationwide stratified survey of about 5000 citizens, to understand what the purported Economic slowdown meant to them? Or did they feel at all there was one? It also tried to estimate, if there were to be an uptick due to an economic stimulus, basically where would the rupee go? This was done to estimate a potential new normal for the Economy as well as potential sectoral growth. Our sister concern M76 Analytics analysed the data in the light of the economic events of the last year to project future trends in the Economy.

More than a third, 35.5% said that in their opinion their economic condition was the same as before. An equal number, 28.5% each felt that their condition had either improved or deteriorated. A smaller number about  7 % felt that their economic condition was extremely hurt.

The verdict also conveys a certain split mandate.Amongst those who say better, are the upper most strata of the middle class, and the lower most strata of the society. Those in between, especially the middle class, and the lower middle class do not feel as positive about the economy. Clearly the expansion of the welfare state has created a fair deal of hope amongst the lower classes.

So wheres the money honey ?

However the dispensation to make an expenditure is quite unlike a growing or aspiring economy, and that is where concerns emerge about the future of the Economy. A hypothetical question was asked to the respondents about what they would do , if they were given an extra lakh rupees to spend – akin to an economic stimulus percolating to the ground. A staggering huge number about 62% of them, said that they would simply save the money rather than spend it. So while the economy may not stagnate like many doomsday prophecies, a huge phoenix like recovery is also not expected. And the quantum of quantitative easing does not matter, as it is simply the directional choice that the consumers would have made.

What should still add another level of discomfort for the economy is the fact that another 17% said that their priority would be simple to clear debts. So only about 21% of the respondents said that they would push the money directly into things that move consumption – Its only such expenditure  that is likely to have a multiplier effect on the cash flow.

Of all those who said that they would like to spend more on Goods and Services, most said that the largest expenditure would be on buying more Grocery and other day to day consumables.Clearly Rotiand other roti related consumables, hold the priority for the poorest. The next set of spends would be on Makaan – After the consumables they said that they would spend more on real estate/housing. The priorities do not change across different classes, just that their priorities change – for the uber rich the proportions are in more equal measure, about 40% each. This means that a house of ones own or real estate as investmentstill matters a lot to the denizens of the country.

A key indicator of the down beat mood in the economy is the perceived unaffordability of day to day goods, an indicator of the growing aspirational lifestyle of individuals. Remember the last time there was excessive inflation in India, they blamed it on the greater purchasing power in rural India. So a revival along those lines, would also mean a rise in Inflation. Now we take a look at the other sector which is likely to see a revival – Housing. As per a report in the Business Today (October 4th, 2019), a record of 13 lakh houses worth Rs 9.38 lakh crore or about 5 pc of Indias GDP lie unsold. So the aspirational purchase of houses is also likely to only exhaust the excess supply, rather than trigger any new activity or produce another multiplier effect in the economy. Thus the PMAY would be a clear winner as far as aligning with aspirational needs of the lower classes is concerned, however it is unlikely to generate the huge monetary velocity that could provide midas touch to the economy. Most importantly, it could well suck out the liquidity, cannibalizing the other sectors of the Economy.

Your current economic condition 
Better than before28.5
Same as before35.5
Worse than before28.5
Extremely hurt7.5

What would you do with more money ? 
Buy a Car/Automobile3.95
Buy White Goods like AC/Refrigerator/Washing Machine4.81
Daily purchase /Grocery (Kirana)54.60
Increase spend on everyday consumer goods from Kirana Store0.37
Purchase Clothes/Footwear5.96
Purchase Real Estate (house/lands)28.67
Spend on Travel and Toursim1.64

If you curtail expenses where would you ? 
Savings Impacted27.72
White Goods21.54
FMCG Goods13.02
Auto Sector13.98
Some Other things23.73

Different Strokes

We judged the inclination to spend by asset ownership, like say a house. Asthe asset ownership declines, the number of people aspiring to spend more on food and related consumables increases. The poorer the respondent, the more the larger the desire to spend on daily use items.Clearly these are seen as an affirmation of lifestyle. However, if a cash crunch were to continue there would be a realignment of priorities. The White Goods sector would be the first one to be hit. This means a larger hit for manufacturing if things don’t improve. What is equally distressing is the fact that in either case, the purchase of automobiles/tractors is completely low on the priority. Which means that Auto purchase is unlikely to pick up, even if the economy pulls through. The Auto sector would remain in distress.


Putting money in the pockets of the people is therefore as much important for long term sectoral growth as it is for generating immediate circulating cash in the economy. Harking back on MNREGA or farm income support schemes are likely to have limitations, as they are likely to spur only the lower most segments, whose biggest priority is spending on food and daily use items ONLY. This is not going to increase expenditure on evolved Manufacturing goods that create larger velocity of money in the ecosystem and also a larger tax foot print. Enhancing middle bracket incomes, and giving them a larger confidence to spend their rupees would do a far greater service to the Economy than pushing more cash down infrastructure and subsistence wage schemes. That could only be throwing. That could only mean lengthening the exit for the vortex of the slowdown.

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