India’s consumption will continue to grow at a slower pace before rebounding, said chief executives of Hindustan Unilever Ltd. and PepsiCo. India Holdings Pvt.
“We live in challenging times,” Nitin Paranjpe, chief executive officer at Hindustan Unilever, said at a conference in Mumbai on Feb. 16. “The short term is likely to be volatile.” The so-called fast-moving consumer goods industry, or FMCG, will see “slightly” lower growth, PepsiCo India CEO Manu Anand said.
India’s government expects the economy to grow at the slowest pace since 2009, as consumers spend less amid high inflation. The Reserve Bank of India raised key interest rates by a record amount from 2010 until October last year to curb rising prices in the world’s second most-populous nation.
“Consumers take longer to make decisions about their purchases because they were uncertain about the economic outlook, said Sadashiv Nayak, CEO of Future Value Retail, a subsidiary of Pantaloon Retail India Ltd. ‘‘People are differentiating between essential and things that are not so essential.’’
Rising borrowing costs hurt Pantaloon, the country’s largest retail company, which reported a loss of 79.6 million rupees ($1.6 million) in the second quarter ended Dec. 31, compared with a 124 million-rupee profit a year earlier.
Reliance Retail Ltd., a unit of India’s most valuable company, Reliance Industries Ltd., expects consumer confidence to rebound in the second half of 2012, said Bijou Kurien, president of the company’s lifestyle operations.
A slowdown in consumer spending has had little impact on same-store sales which grew eight percent to 22 percent in January from a year earlier, he said.
India may see significant increases in consumption amid growing incomes, said Paranjpe from Hindustan Unilever, a unit of the world’s second-largest consumer-goods maker.
India’s consumer spending is likely to almost quadruple by 2020 to $3.6 trillion spurred by economic growth and rising incomes, as household incomes could climb 2.9 times from 2010 to 2020, according to the Boston Consulting Group.