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Blaming it on the tepid pace of the vaccination drive, Fitch Solutions on Friday trimmed India’s household spending forecast for 2021 to 8.9% from 9.1% estimated in June.

In its latest report ‘India Consumer Outlook’ released today, Fitch examined key drivers of retail sales growth, the future prospects, consumer spending and investments in the private sector. The report also examined the potential for growth of the retail sector and the changing consumer demographics that influence demand.

Fitch report suggested that 32.5% of India’s population has received at least the first dose of the vaccine as on August 2021, which is below Asian average of 33%. However, it expects the consumer spending to recover to the pre-pandemic level in 2022.

According to the report, total household spending in real terms is expected to reach Rs 72.6 lakh crore in 2021, which would still be below the 2019 (pre-pandemic) level of Rs 73.5 lakh crore. India’s household spending contracted 9.3% in 2020, when it was hit by the first wave of Covid-19 pandemic.

“We believe that the recovery of India’s consumer and retail sector will spill into 2022, where we forecast real household spending growth to reach 7.1%. In 2022, we project real household spending to reach a total of Rs 77.7 lakh crore. This is 5.8% more than the total spending in 2019, indicating that a full consumer spending recovery will take place in India in 2022,” the report said.

As per the survey conducted by RBI, India’s consumer confidence also took a hit in 2020. It fell to a five-year low of 49.9 (September 2020) in the current situation index (CSI).

As per fitch, this indicates a cautious outlook and will weigh on consumer spending. It also said that poor consumer demand has impacted credit growth as people postponed their non-essential spending, and as per its analysis, consumer spending on big-ticket items will likely be deferred until the economic and health situation in the country stabilize.