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Consumer More Willing To Buy?

Monday, July 11, 2016
By Dominic Rebello

India’s Buying Propensity Index throws up interesting facts… Q1 2016 BPI was at 0.42 which shows a high propensity to buy in the quarter. Though there has been southward pressure on BPI from April through June due to several extraneous factors, the overall Buying Sentiment outlook remains ‘Positive’

A measure of the country’s ‘keenness to buy’, which evaluates the current overt, covert and contextual buying sentiment of India through a primary research reveals that India’s Q1 2016 Buying Propensity Index stood at 0.42, (measured on a scale between +1 to -1) displaying a high buy keenness in Q1. April 2016 started at a higher BPI at 0.46 and downward pressure was exerted through May (BPI=0.44) and June (BPI=0.37) due to delayed monsoon, inflationary pressure and the BREXIT uncertainty. The report by TRA Research’s Buying Propensity Index (BPI) also throws up some interesting facts

According to it, the dominant sentiment in the quarter displayed a ‘Positive’ outlook with 69% responding positively or moderately positively. The Buying Propensity Index is a result of a primary research across 3000 consumer-influencers across 8 cities in India conducted every quarter.

N. Chandramouli, CEO, TRA Research, elaborated on the Buying Propensity Index for Q1 2016 and said, “Buying Propensity is a natural pull that manifests on the basis of Trust (based on reasons to buy) and Attractiveness (based on the inherent magnetic pull to be bought). These two combine to make the fundamental substrate on which all buying decisions are made.”

He further added, “The Buying Propensity Index is a detailed research considering three factors, the Transactional and Aspirational and Environment buying sentiment of the Indian consumer. The overall Q1 2016 BPI was at 0.42for India which on a +1 to -1 scale shows a high propensity to buy in India. This is despite a southward pressure on BPI from April to June due to several extraneous factors. The ‘Positive’ Buying Sentiment outlook is an important indicator of how consumers are looking at making buying decisions over the next two quarters, and, if there are no surprises, we can expect buying to pick up.”

Issues Watch – Q2 2016
Seventh Pay Commission Implementation

The Union Government approved the Seventh Pay Commission’s recommendations on 29 June, 2016, which is expected to benefit 10 million government employees and pensioners. They will get a hike of 2.5 times their basic pay or pension, costing the exchequer Rs. 1.02 lakh crore annually. The pay revisions, coupled with job creation in light of burgeoning investments by the private sector and foreign players (thanks to 100% FDIs in certain major sectors), are expected to boost the individual’s overall buying sentiment in Q2 2016.

Credit Policy Announcement
The RBI kept interest rates unchanged in the last policy meet on June 7, 2016, citing the resurgence of inflation pressures. Given the upward movement of commodity prices and the domestic inflation trajectory, it remains to be seen whether the interest rates will undergo any further cuts in the August policy meet. An interest rate cut is expected to reduce buyer burden and will lead to better individual buying sentiment as more money finds its way into the hands of the consumer.

FCNR Deposit Redemption
Redemption of Foreign Currency Non-Resident (bank) deposits worth USD 25 billion will commence in Sept 2016. The forthcoming redemptions are expected to pose a challenge if foreign exchange flow dries up due to BREXIT, as banks will struggle to deliver more than USD 10 billion of forwards to the RBI, leading to increased volatility in the money markets. There is also a fear that there will be a shortfall of USD 9.5 billion which is still not covered for by the RBI. Also, it is possible that a bout of volatility may hit the exchange rate and rupee liquidity, thereby impacting the individual’s sentiment about the country’s buying environment.


Trust-based or transactional buying mostly caters to ‘needs’, those items that one finds necessary to have a comfortable life, something that can be seen in terms of physiological fulfillment. This is directly related to one’s spend-capacity and has a cognitive decision process. Attraction-based buying or emotion-led buying mostly caters to ‘desires’ of individuals, the items that provide a sense of self and social worth. When desires are catered to, they bring psychological fulfillment to life. The third aspect that affects buying sentiment is the environment, the context in which the buying occurs. If the context changes, so does the buying sentiment.

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