A Very Subdued Diwali

by Mahesh Vyas

It wasn’t just me who noticed that this Diwali was spark-less. Less houses displayed lights outside their balconies and those that did, displayed less lights than usual. Less fire-crackers were heard. I checked around with my colleagues, friends and extended family members across the country and got the same experience from everyone, without exception. This Diwali, bazaars were less crowded and the mood was less upbeat.

Newspapers reported that less gold was sold during this Dhanteras and that car sales were lower than expectations. So were the sales of consumer durables. This paper reported yesterday that "this season will probably go down as the toughest for fashion, durable and auto retailers/manufacturers, which log 30 per cent of annual sales this time of the year. The crucial Diwali week, which concluded on Sunday, saw some discretionary spending by consumers. But, sales were lower compared to last year."

The Economic Times reported that TV sales during this Diwali were up 10 per cent compared to the last Diwali. And that washing machine sales were up by 9 per cent, refrigerators by 10 per cent, air-conditioners by 8 per cent and microwave ovens by 9 per cent. This is a relief as sales were reported to be a washout during Onam and Durga puja.

Yet, one cannot miss the point that a barely-10 per cent growth during festival season can be a cause for celebration only in the light of very low expectations.

The BSE-CMIE-UMich consumer sentiments indices have been pointing to low consumer sentiments and expectations. Specifically, the indices have also been indicating that consumers are not very enthusiastic about purchases of durables around this time as they usually are.

During 2016, the proportion of households that said it was a good time to buy consumer durables was 9.7 per cent higher than those who said that it was a bad time. This is the average for the full calendar year. The range was a minimum of 3 per cent and a maximum of 17 per cent i.e. the proportion of households saying that this was a good time to buy consumer durables was at least 3 per cent higher than those saying it was a bad time.

During 2017, so far, on a net basis, the proportion of households that said it was a good time to buy durables was only 4.8 per cent - exactly half of what it was in 2016. And there were two weeks in 2017 when the number of households saying that this is a bad time to buy outnumbered those that said it was a good time.

Evidently, 2017 has been a bad year for consumer durables companies compared to at least 2016. And, the 2017 Diwali week was much worse. Households that believed that the Diwali week was a good week to buy consumer durables were only 0.7 per cent higher than those who believed it was not a good week to buy durables. In comparison, in 2016, households that were similarly upbeat were 10.8 per cent higher on a net basis.

In the three weeks ending in Diwali in 2016, on an average 12 per cent of the households were upbeat on a net basis. In the three weeks ending in Diwali of 2017, only 3 per cent of the households were upbeat on a net basis.

We don’t see this relative pessimism in consumers coming to an end soon. Consumer expectations were at the lowest during the week ended October 22. The consumer expectations index fell to 87.9. This was 1.3 per cent lower than its level in the preceding week ended 15 October. The index for the week ended 15 October was the lowest till the latest week’s data broke its record.

The index of consumer expectations is a combination of answers to three questions posed to households: Do you think your family income a year from now would be higher than this year, lower or the same; do you think that business conditions a year from now would be better, worse or the same compared to the current conditions; do you think over the next five years the country will rise continuously, fall continuously or will go up and down?

Between April 2016 and April 2017, households were generally more optimistic when answering these questions compared to questions relating to an assessment of their current economic conditions. However, from May 2017, expectations have turned distinctly negative. And, they are getting worse.

During eight of the last nine weeks, the index of consumer expectations was lower than the index of current economic conditions. During the last five weeks, the index of consumer expectations lost as much as 10.3 per cent. Something needs to break this negativity among households, soon.

First Published in Business Standard Link

Unemployment Rate
Per cent
5.5 +0.0
Consumer Sentiments Index
Base September-December 2015
95.6 +0.2
Consumer Expectations Index
Base September-December 2015
96.0 +0.3
Current Economic Conditions Index
Base September-December 2015
95.0 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Sep 17 Dec 17 Mar 18 Jun 18
New projects 1.25 1.49 3.42 2.27
Completed projects 1.25 1.16 1.43 0.82
Stalled projects 0.69 0.88 3.41 0.30
Revived projects 0.34 0.22 0.26 0.22
Implementation stalled projects 0.78 0.71 1.92 0.03
Updated on: 20 Jul 2018 12:20PM
Quarterly Financials of Listed Companies
(% change) Sep 17 Dec 17 Mar 18 Jun 18
All listed Companies
 Income 7.9 12.0 10.1 20.1
 Expenses 9.0 13.0 16.8 22.5
 Net profit -18.0 -14.3 -82.0 11.0
 PAT margin (%) 5.5 4.8 1.2 15.0
 Count of Cos. 4,502 4,493 4,286 96
Non-financial Companies
 Income 8.2 13.3 11.5 19.7
 Expenses 8.1 12.3 12.4 23.2
 Net profit -6.1 13.2 -2.6 6.6
 PAT margin (%) 6.2 6.4 6.5 14.9
 Net fixed assets 9.2 11.9
 Current assets 2.9 8.0
 Current liabilities 11.0 10.3
 Borrowings 3.4 1.8
 Reserves & surplus 7.9 7.8
 Count of Cos. 3,460 3,464 3,318 70
Numbers are net of P&E
Updated on: 20 Jul 2018 12:21PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.6 1.8 5.9 11.6
 Expenses 5.7 1.9 5.9 16.1
 Net profit 0.1 -9.7 25.3 -43.1
 PAT margin (%) 3.0 2.8 3.4 4.3
 Assets 9.5 10.2 7.4 14.3
 Net worth 8.5 11.3 7.6 13.7
 RONW (%) 5.8 4.9 5.8 5.3
 Count of Cos. 26,129 24,412 21,971 368
Non-financial Companies
 Income 4.9 1.0 5.7 9.9
 Expenses 5.0 0.3 6.1 9.2
 Net profit -8.6 19.9 20.2 8.9
 PAT margin (%) 2.0 2.4 3.0 12.1
 Net fixed assets 13.3 17.8 6.6 55.5
 Net worth 7.0 12.1 6.5 10.3
 RONW (%) 4.6 5.1 5.9 15.0
 Debt / Equity (times) 1.1 1.1 1.0 0.3
 Interest cover (times) 1.9 1.9 2.1 8.8
 Net working capital cycle (days) 66 65 62 7
 Count of Cos. 21,306 20,431 18,292 255
Numbers are net of P&E
Updated on: 20 Jul 2018 4:05PM