Consumer spending to rebound in 2021: Fitch

After a COVID-19 pandemic-led contraction in consumer spending in 2020, household spending will return to growth in 2021, expanding by as much as 6.6%, Fitch Solutions said on Monday.

Consumer spending in India is forecast to have contracted by 12.6% in 2020.

“While growth will return to positive in 2021, we do note the recovery will be slower than most countries, as a result of the significant contraction over 2020,” it said. “Unemployment will remain heightened, while the effectiveness of government support measures is questionable.”

Fitch Solutions forecast a return to pre-COVID-19 levels only over the second half of 2021 and 2022.

In nominal terms, total household spending will only be 1.2% higher than what it was in 2019 (₹123 lakh crore in 2021, compared to ₹121.6 lakh crore in 2019), indicating the extent of the impact that the pandemic has had on consumer spending.

Fitch Solutions said the main categories will return to growth in 2021.

However, the economic impact of 2020 had created a significant base effect.

Food and non-alcoholic drinks were prioritised in household budgets in 2020 and so growth in spending on these items will be slightly lower than in 2020.