India’s disturbing consumption slowdown pattern: Kotak

Mumbai, May 6 (IANS) Insufficient income growth may have pushed the Indian household to cut down on its consumption and the pattern of this consumption slowdown is "disturbing", according to a recent report that takes into account both macro and micro data.

A Kotak Institutional Equities Research report says the next government may have to face the burden of reviving the country's flagging economic growth.

"The weak volume growth reported by consumer staple companies in 4Q (fourth quarter) FY19 underlines the slowdown seen in housing over the past 5-6 years and in automobiles over the past year," the report said.

"Housing demand has been weak for the past several years and property prices broadly stable. The overall expenditure on residential real estate is down meaningfully, which is amplified as a larger decline in the household physical savings rate in national savings data as the base has grown over this period," it added.

The report noted that auto sales volumes saw a slowdown from the second half of the last fiscal and in general consumption, based on volumes of consumer staple companies, from the fourth quarter.

A combination of monetary stimulus and structural reforms may help revive growth over time, but India's high and "persistent fiscal deficit, faltering tax revenues and broken business models in agriculture and infrastructure rules out further fiscal stimulus", the report said.

While the liquidity problems of non-banking finance companies (NBFCs) and solvency challenges are still a concern, the improvement in the balance sheets of banks can support overall credit growth by offsetting the NBFCs' likely lower loan disbursement, it added.

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