Intentions to buy consumer durables during pitrupaksh

by Mahesh Vyas

This is the period of Pitrupaksh. It began on September 5th and will continue till September 19th. During this period Hindus, in general, do not begin any auspicious task. In particular, they avoid buying (or even negotiate buying) cars, houses or white goods like television, refrigerator, and the kind. Business slows down in general during pitrupaksh. Consumer durables anticipate a fall in sales during this period.

How does this pitrupaksh effect show in consumer sentiment indices? A fully defensible answer to that question is in the realm of academic research. And, that may require a longer time-series than we have built so far. Nevertheless, we can make some observations of consumer sentiment indices and draw some better insights from their constituents, around pitrupaksh.

The BSE-CMIE-UMich consumer sentiments indices are based on responses to five questions. One of these five is a specific question on intentions to buy consumer durables. The question goes as follows: "Do you think that this is generally a good or bad time to buy things like furniture, refrigerator, television, two-wheeler, car? The respondent is requested to pick one of the three options - Good time, Same as other times, Bad time, that best reflect the view of the household.

Usually, between 25 and 30 per cent of the respondents say that it is a good time to buy such goods. During a short-lived period between mid November and end December 2016 this proportion had shot up over 30 per cent and peaked at 34 per cent.

Interestingly, while the proportion of respondents saying this is a good time has remained steady over time, the proportion of respondents saying that this is a bad time to buy has increased from 15-20 per cent to 20-25 per cent. This shift happened in December 2016.

It is the difference between the good-times and bad-times responses (net responses) that tell us something about the shifts in sentiments. It is evident from the above that on a net basis, households think that most times are good times to buy durables. On a net basis, 5-10 per cent of the households believe that it is a good time to buy durables.

In 2016, pitrupaksh had no negative impact on the net intentions to buy consumer durables. The pitrupaksh period in 2016 was from September 16through October 1. Throughout this period, the per cent of people who said it was a good time to buy consumer durables on a net basis rose systematically and handsomely.

Only 3.7 per cent of the respondents on a net basis said that it was a good time to buy during the week just before the pitrupaksh period began in 2016. By the end of the period, this ratio had risen to 11.4 per cent. The ratio of people who believed that it was a good time to buy, increased from 23.4 per cent to 29.4; at the same time the ratio of people who believed that it was a bad time to buy decreased from 18.8 per cent to 16.8 per cent.

Perhaps, a good monsoon after two years played a bigger role in the minds of households than the tradition of pitrupaksh.

The week ended September 10 was the first week of the 2017 pitrupaksh period.

On a net basis, the per cent of households who believed that is good time to buy consumer durables rose 0.5 percentage points compared to the earlier week. This again, is contrary to what is expected of a pitrupaksh period in India.

More importantly, the proportion of net buyers has been falling more or less systematically since the beginning of August 2017. In the week ended July 30, 10.3 per cent of the households believed that this was a good time to buy. By the end of week ended September 3, this was down to a mere 0.3 per cent. The first week of pitrupaksh did not make this ratio worse. It raised it to 0.8 per cent.

It is noteworthy that the question addressed to households does not talk about the future. It talks about the present. Households overwhelmingly said that the pitrupaksh time was a good time to buy and not a bad time to buy. How do we square this with the rise in overt Hindutva.

Apparently, Indian households are more rational economic agents than their culture may make them look like. A good monsoon after a long break in 2016 warranted an exception to cultural traditions. An auspicious Ganesh Chathurthi, Onam, Janmashthami along with Bakra Id and Pateti - all in August 2017 - could not lift consumer sentiments during August in the face of a very poor jobs scenario. Rationality, apparently, is an integral part of the argumentative Indian as an economic agent.

We shall soon see what households tell us during the remaining period of pitrupaksh this year.

First Published in Business Standard Link

Unemployment Rate
Per cent
6.2 +0.0
Consumer Sentiments Index
Base September-December 2015
101.5 +0.3
Consumer Expectations Index
Base September-December 2015
100.7 +0.5
Current Economic Conditions Index
Base September-December 2015
99.5 +0.9
Quarterly CapeEx Aggregates
(Rs.trillion) Sep 17 Dec 17 Mar 18 Jun 18
New projects 1.25 1.51 3.43 2.32
Completed projects 1.26 1.16 1.57 0.91
Stalled projects 0.69 0.88 3.44 0.30
Revived projects 0.34 0.24 0.26 0.22
Implementation stalled projects 0.78 0.71 1.92 0.04
Updated on: 18 Aug 2018 12:20PM
Quarterly Financials of Listed Companies
(% change) Sep 17 Dec 17 Mar 18 Jun 18
All listed Companies
 Income 7.9 12.0 9.7 16.3
 Expenses 9.0 13.0 16.2 19.4
 Net profit -18.0 -14.3 -80.1 3.7
 PAT margin (%) 5.5 4.8 1.2 5.5
 Count of Cos. 4,508 4,503 4,360 4,023
Non-financial Companies
 Income 8.2 13.3 11.1 18.5
 Expenses 8.2 12.4 11.7 20.3
 Net profit -6.0 13.2 1.8 33.5
 PAT margin (%) 6.2 6.4 6.6 7.2
 Net fixed assets 9.2 11.8
 Current assets 2.9 7.2
 Current liabilities 11.0 10.4
 Borrowings 3.4 1.9
 Reserves & surplus 7.9 7.2
 Count of Cos. 3,464 3,471 3,372 3,172
Numbers are net of P&E
Updated on: 18 Aug 2018 12:20PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.6 1.8 6.0 9.9
 Expenses 5.7 1.9 6.0 13.3
 Net profit 0.1 -9.7 25.8 -37.5
 PAT margin (%) 3.0 2.8 3.5 4.2
 Assets 9.5 10.2 7.5 13.2
 Net worth 8.5 11.3 7.7 12.8
 RONW (%) 5.8 4.9 5.8 5.7
 Count of Cos. 26,178 24,474 22,051 749
Non-financial Companies
 Income 4.9 1.0 5.8 8.5
 Expenses 5.1 0.4 6.1 8.0
 Net profit -9.4 19.9 20.7 6.6
 PAT margin (%) 2.0 2.4 3.0 9.3
 Net fixed assets 13.3 17.9 6.7 27.6
 Net worth 7.0 12.0 6.6 9.7
 RONW (%) 4.6 5.1 5.9 13.2
 Debt / Equity (times) 1.1 1.1 1.0 0.4
 Interest cover (times) 1.9 1.9 2.1 6.2
 Net working capital cycle (days) 66 65 62 8
 Count of Cos. 21,351 20,488 18,371 585
Numbers are net of P&E
Updated on: 12 Aug 2018 11:30AM