Fewer restaurant visits and new clothes, more non-veg food – how Covid has affected Indian spending

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New Delhi: Two years ago, the Covid-19 pandemic hit India, changing life as we know it. The subsequent closures have significantly affected livelihoods, destroyed the economy and forced many people to remain confined to their homes.

So how has the pandemic impacted the consumption behavior of over a billion Indians, which technically drives the economy?

According to the latest data published by the Ministry of Statistics and Program Implementation (MoSPI) Regarding consumption in the financial year 2020-21, Indians spent less on restaurants, hotels, alcohol, tobacco and clothing, but more on food, especially eggs, seafood and meat.

They cut back on their intake of soft drinks and fruit juices, but didn’t skimp on their morning cup of tea or coffee, the data shows.

While Gross Domestic Product (GDP) figures tell us about the quantum of all economic activity in a country, the private final consumption expenditure (PFCE) — a major component of India’s GDP – is a measure of how much people spend on consumption of goods and services.

The National Accounts Statistics, released by MoSPI on May 31, charted consumption data for 2020-21 (revised estimates), which details where Indians spent their money for consumption purposes. These numbers quantify the magnitude of change that has occurred in each retail sector.

According to this data, household food and utilities was the only goods group to show a positive growth rate compared to the previous, non-pandemic fiscal year (2019-20), while spending for all the other groups of articles registered a decrease.


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Significant cuts in catering and hotel spending

According to MoSPI statistics, the most affected consumer sectors during the pandemic year were restaurants and hotels, clothing and footwear, durable and semi-durable goods, transportation, alcoholic beverages, tobacco and narcotics (intoxicants), and the furniture and leisure sectors. .

These sectors recorded a drop in growth of more than 10% in 2020-21 compared to 2019-20. During the same period, the overall consumption in these sectors fell 6%.

In 2020-21, Indians spent Rs 92,671 crore on restaurants and hotels, compared to spending more than double – Rs 2 lakh crore – the previous year.

On average, consumption in this sector was growing at 8.7% annually with an average expenditure of Rs 1.7 lakh crore in the five years before the pandemic – 2015-16 to 2019-20.

The pandemic has dealt a severe blow to the tourism industry and as a result many hotels have closed. Due to the Covid restrictions put in place in restaurants, their attendance has also dropped drastically.

Credit: Prajna Ghosh | The footprint

The catering and hospitality sector accounted on average (2015-2020) for about 2.4% of India’s domestic consumer spending, which was halved during the pandemic to just 1.2%, according to MoSPI data.

According to Gurbaxish Singh Kohli, vice president of the Federation of Hotel and Restaurant Associations of India, the industry had estimated a loss of Rs 1.4 lakh crore in the first pandemic year.

“The consumer data GDP figures have corroborated our estimates and also justify our continued call on the government for some specific relief measures to lift the industry out of distress,” Kohli told ThePrint. “Given the massive damage that has decimated the sector’s ecosystem, the industry expected strong measures from the government to support hospitality and related businesses.”

22% drop in spending on clothes, shoes

Apart from restaurants and hotels, Indians also spent less money on clothes.

In 2019-20, Indians spent around Rs 4.43 lakh crore on clothes and footwear, which fell by 22.2% in 2020-21. Consumption of these items was already growing slowly at 1.3% (calculated based on MoSPI data)and this has been exacerbated by the pandemic.

Since the pandemic curbed outings, commuting and travel, Indians have drastically reduced their transport spending. In 2020-21, consumers spent Rs 12.27 lakh crore on transport – a drop of 19.4% from 2019-20 (Rs 15.23 lakh crore).

Alcohol consumption drops sharply

The pandemic year also saw consumption of alcoholic beverages, tobacco and narcotics (intoxicants) fall by around 16% (in total). In 2019-20, Indians spent Rs 1.60 lakh crore on these items, which fell to Rs 1.35 lakh crore in 2020-21.

In this particular section, expenditure on alcohol recorded the largest decline, falling to Rs 30,000 crore in 2020-21 from Rs 41,700 crore in 2019-20, a drop of around 26.8%.

Spending on tobacco decreased by 17.2% and spending on narcotics (intoxicants) by 2.2%.

Furniture spending decreased by 13.4%, recreation and culture by 11% and communications by 6% compared to 2019-2020.

The miscellaneous goods and services category typically accounts for 16% of India’s total domestic consumption expenditure. This segment includes personal care – ranging from bath soaps to salon/salon visits, ornaments, clocks, suitcases, etc.

Consumption of these personal care items fell by 4% in 2020-21, according to MoSPI data.

Where expenses have increased

Estimates of government consumption data have shown that, unlike non-essentials – spending on which can be deferred or postponed – spending on essential items like food and household utilities has increased during the pandemic.

Consumer expenditure on food and (non-alcoholic) beverages – the whole sector – increased by 3.9% in the pandemic year, to Rs 23.5 lakh crore in 2020-21 from Rs 22, 6 lakh crore in 2019-20.

However, while food expenditure has increased, consumer expenditure on soft drinks has fallen by 16% – to Rs 30,000 crore in 2020-21 from Rs 35,000 crore in 2019-20.

Within these soft drinks, consumer spending on soft drinks, mineral waters, fruit and vegetable juices fell by around 28% (to Rs 15,000 crore in 2020-21 from Rs 21,000 crore in 2019-20).

Expenditure on tea, coffee and cocoa fell by 0.1%.

Prior to the pandemic, consumer spending on food and beverages was growing at an average rate of 6.52% per year (2015-2020), according to MoSPI data.

Among food products, oils and fats saw the largest increase in spending (18.6%) in the pandemic year, followed by food products not elsewhere classified (mainly spices) at 9.4%.

Consumer spending on animal products has also seen significant growth during the pandemic. Spending on eggs jumped to Rs 22,500 crore in 2020-21 from Rs 21,000 crore in 2019-20. Spending on fish and seafood jumped 4.8% – to Rs 1.34 crore from Rs 1.27 crore – while spending on meat increased by 4.4% in 2020-21.

The growth rate of all these items is based on their price in 2011-2012. Therefore, spending on these items has not been affected by current inflation.

(Edited by Gitanjali Das)


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