Middle class feels the price pinch

NEW DELHI: Here is a bottom up view of how prices are impacting middle class India. A majority (54%) of consumers believe prices have gone up on all items of daily household consumption, and 50% are convinced that prices have crept up to 10-20% in recent weeks.

This clearly indicates that the government’s inflation measures, the Wholesale Price Index (WPI) (5.24% for the week ending June 10) and the Consumer Price Index for Urban Non-Manual Employees (5.8% for May) may be out of sync with reality, or at least the perception held by most consumers.

ET commissioned global market research agency Synovate India to conduct a price perception survey across five metros — Delhi, Mumbai, Kolkata, Chennai and Bangalore — with sample of 1,007, spread amongst socio-economic class (SEC) A&B consumers, chief wage earners and housewives in the age group of 25-40 years.

The results of the survey reveal that fuel prices were a dominant factor in the price increase across all items. The majority, almost two-thirds, believe that the government could have acted more swiftly in containing the price hike either through reducing duties on petro products and through timely duty-free import of food items.

There appears to be a feeling among the middle class that the government may have acted a bit late in tackling inflation. Also, most households have started pruning other expenses or changing their food habits as a way to cope with the price spiral.

The survey also revealed that people expect a further hike in interest rate by the Reserve Bank of India (RBI) to deal with the growing threat of inflation.

This means that the middle class is bracing itself for costlier loans, whether it is for buying houses, cars and other durables. There are interesting insights on how consumers from different cities have responded to issue of price rise.

For instance, Bangalore and Delhi seem relatively less impacted, though Kolkata and Chennai have felt the sting of inflation much more.

Mumbai seems to be mixed bag. Understandably, people with comparatively less disposable incomes, primarily from SEC B, seem to be more price sensitive, with almost two-thirds (62%), saying that prices have gone up on all daily consumption items, even though their response to it in terms of cutting other expenses et al virtually mirrors their richer counterparts in SEC A.

The bogey raised by the opposition about widespread hoarding and black-marketing does not seem to have cut much ice with the respondents.

Just 12% of the respondents attribute the increase in prices to hoarding and profiteering. In fact, many are convinced that inflation is now a global phenomena, spilling over to India.

About 88% of consumers felt that fuel prices and other global inflationary pressures have pushed up prices. Though they clearly see the economics of price rise, they expect the government to soften the impact to their household budgets by either rolling back fuel prices, and surprisingly cracking down on profiteering that a few opportunistic commodity traders may be indulging in.