Groups of students stroll out of a south Mumbai college on a warm and humid evening. As we approach each group for a photo shoot, the reply is a polite no.
Nearly five dozen students decline to be the face that will project a nation brimming with confidence. After two hours of keeping pace with the young brigade, six students agree.
Indian consumers may be camera shy but when they sit in front of a computer screen, it looks like they rule the world. In an online survey on Global Consumer Confidence and Opinions conducted by the global market research major ACNielsen, Indian consumers, compared to survey respondents from 37 other nations, have expressed the highest confidence in the economic performance of their country.
"In the context of the global economy, this forms an important inflection point in our perception among the international investment community," says Sarang Panchal, executive director, customised research services, ACNielsen South Asia.
On yet another parameter -- improved economic performance in the past six months -- 79 per cent of the Indians have given India a vote of confidence. The ACNielsen Global Consumer Confidence Index adds more stars to the Indian scores.
Based on three dimensions -- job prospects, personal finance and spending desires -- the index compares confidence levels across all countries. At the top of the index is India with a score of 127, followed by New Zealand with 119 and Ireland with 113.
What's more impressive is that the latest survey's results follow a more muted period of consumer confidence in India. Just six months back -- in the previous edition of this survey -- the consumer sentiment and confidence was jittery.
In December 2004, only 59 per cent of Indians felt that their country's economic performance had improved in the second half of the year. India was ranked seventh among 13 countries covered in the Asia Pacific region.
That was a huge setback if you note that 85 per cent of Indian consumers felt that economic conditions had improved in the six months to December 2003. This emotion continued till mid-2004 before confidence went on a downward spiral. The reasons: a bad monsoon in certain parts of the country, coupled with inflation.
Universal Knowledge
India may be flying, but how do we compare with the rest of the world? In the past six months, South Africa (64 per cent confidence) and the Asia Pacific region (41 per cent) were the most optimistic.
In contrast, less than 20 per cent of consumers in both Europe and North America believe that their local economies improved in the first half of 2005.
Consumers in India, followed by Hong Kong and China, feel the most upbeat. Importantly, all three countries have moved up in confidence, compared to the last survey. The buzz of excitement is missing in countries such as Greece, Italy, France, Germany and the US.
These sit at the bottom of the list and consumers perceive that economic conditions have deteriorated in the past six months. Even the immediate future is bleak.
Expert Opinion
Consumers have their own whims -- their likes or dislikes may not be backed by sound logic. Sarang Panchal of ACNielsen justifies the reaction of the Indian consumer: "The sentiments are broadly backed by solid rationale in terms of reading external signals -- stock market, employment, wage increases, government expenditure and so on."
However, The Strategist decided to ratify these consumer findings by comparing it with a research report written by William Wilson, managing director and chief economist, Keystone India, a business advisory services firm. According to a report released in May 2005, India will be the world's third largest economy by 2030, behind only the US and China.
India's working age population is expected to grow continuously. For instance, it will grow by an estimated 350 million over the next 25 years -- twice as much as the US, Western Europe and China combined (at present, China's working age population dwarfs India's by 230 million).
However, more than half of India's population is currently under the age of 25, compared to 39 per cent for China. Wilson predicts, "In one of history's most dramatic demographic turnarounds, India's working age population is projected to exceed China's by 230 million by 2050."
In addition, the sharp rise in working age population in India will translate into a rising proportion of gross domestic savings, thereby fueling domestic investment and economic growth. At the same time, China is aging faster than any other country in history, largely due to its one-child policy.
Wilson adds that India has also used invested capital better than China. Over the past decade, India's average annual GDP growth rate of six per cent coincided with an investment rate of 22-23 per cent of the GDP.
China invested almost twice as much (as a share of the GDP), but its average annual GDP growth rate has been only about 50 per cent higher than India. According to Wilson, this higher return on invested capital in India is critical as it begins attracting more foreign direct investment.
The Keystone report also indicates that India is the only large economy that will maintain growth rates in excess of five percent till the middle of this century. It adds that India's per capita income will grow 30 times from its current level by the middle of the century.
According to the report, "By 2020, India is expected to surpass China to emerge as the world's fastest growing major economy. In this process, India will begin to change the balance of world economic power." When that happens, students in Mumbai may rush to pose for a photograph.
Asia Pac: mixed signals
The Indian consumer may have a confident outlook but most of the countries in the Asia Pacific region did not share similar sentiments. Of the 13 Asia Pacific countries that took part in the survey, consumers in nine countries were low on confidence -- less than 40 per cent consumers in these countries felt that the economic performance had improved in the past six months.
The countries with the lowest morale were the Philippines (15 per cent) followed by Korea and Indonesia (18 per cent). Looking at the past confidence level, however, the Philippines and Korea are more upbeat -- in the last survey their consumers had shown a confidence of 2 per cent and 7 per cent, respectively.
The countries where consumers are losing confidence are Malaysia, Australia, Singapore, Indonesia, New Zealand and Taiwan, in that order. Thailand and Japan remained relatively stable.
Confidence in the economy reflects on job prospects, too. Thirteen per cent of Indian respondents felt that job prospects in the next six months are extremely good while 72 rated it as good.
However, the top three confident countries -- India, Hong Kong and China -- moved up in the past six months when the last survey was conducted. As a result, the gap between the top three and the rest is widening.
Will confidence separate the haves from the have-nots?
Investment savvy
Indian consumers feel that their personal financial status is in an excellent condition. If Indian consumers have a lot of spare cash, how do they plan to spend it?
Fifty-four per cent of Indians mentioned that they would save whatever was left after meeting essential expenses. But India was not the only country to say that.
Across the globe, saving money notched the highest scores (36 per cent). India was sixth in a list of countries that would save money. The Philippines was at number one, where 63 per cent respondents said they opt to save.
However, Indians are not just content with saving. They would also like to see their money grow faster. Hence, 41 per cent of Indian respondents expressed an intention to invest in shares or mutual funds. For the record, India topped the list of global ten.
ACNielsen's Panchal says, "The sophistication of affluent consumers in terms of planning portfolios certainly seems to be increasing. Also, the buoyant market conditions help activate this."
However, executives from the Indian financial service companies are not too excited. Says Hemant Rustagi, CEO, Wiseinvest, a personal finance advisory firm, "I am not sure about that."
The reason: In India, mutual fund investments are only 10-11 per cent of total bank deposits.
In markets like the US, mutual fund investments are more than bank deposits. Like Rustagi adds, "As a country there is a long way to go before saying that we have an equity culture in place."
Worldwide worries
What is it that consumers consider their major concerns
Globally, the state of the economy ranks as the top-most concern (45 per cent). For consumers in the Asia Pacific region, economic concerns are a shade higher (50 per cent).
On the other hand, South Africa did not share the same levels of concern -- only 32 per cent of respondents there labeled their economy as being the primary concern. Indonesia tops the list of countries who rank the economy as their biggest worry (41 per cent).
Job security is the second-biggest concern across the region, followed by health. In the second half of 2004, job security was the biggest issue in Korea.
Surprisingly, despite the fact that China's booming economy is creating a lot of job opportunities for its people, the Chinese consumers do not feel safe -- job security is the greatest concern in China (36 per cent). Globally, respondents from Chile had the greatest concern about job security (64 per cent).
Health issues are the biggest concern in Europe (19 per cent). Even countries like Finland, a country with top-quality health facilities, topped the list of countries who ranked health as their main worry (30 per cent).
In Asia Pacific, China topped the region as 26 per cent of Chinese cited health being the biggest issue. Indians were a distant eighth, though their concern for health is growing (31 per cent).
"India's fast growing economy does face risks, including the world's second highest number of AIDS cases, India's turbulent relationship with Pakistan, and the need to find significant energy sources," says William Wilson, managing director and chief economist, Keystone India, a consulting and business advisory firm.
However, what concerns Indians over the next 12 months is not war and health. Thirty-seven per cent of Indians cite the economy and job security as being their most pressing worry. That is a paradox. On one hand, Indians are the most optimistic consumers.
On the other hand, the economy and job security are their biggest concerns. "This apparent schizophrenic outlook can be explained by the fact that this phase of hectic growth is bound to attract a modicum of doubt about its sustainability, says Panchal.
He adds, "With equity markets scaling new highs but remaining volatile in the short term, inflation threatening to push interest rates upwards and employee churn within high-growth sectors, slight insecurities about the sustainability of this positive phase are bound to arise."
Having said that, 23 per cent of Indians cited political stability as a reason for concern. But this number has come down by eight percentage points since the last round of the survey in December 2004.
Panchal says that as consumers have their basic needs fulfilled and economies chug along at aggressive growth rates, individuals tend to be more concerned with taking care of themselves rather than the fear of being unemployed.
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