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Household spending power will increase by Rs 1.40 lakh crore in fiscal 2016 because of low fuel prices, benign food inflation and steadily improving income growth, according to Crisil Research.
Measured in nominal terms, the increase is close to 2 per cent of the annual spending of households.
Crisil Reseach estimated that the fall in food inflation and lower fuel prices will together yield additional ‘savings’ (or increase in spending power) of Rs 1.4 lakh crore in fiscal 2016 compared with nearly Rs 50,900 crore in fiscal 2015.
Savings on fuel expenses alone will be Rs 30,000 crore, while on food it will be more than thrice that at Rs 1.10 lakh crore.
“These converging tailwinds, we believe, will lend the Indian economy a reasonably good consumption kicker,” the research arm of credit rating agency Crisil said.
And where will these ‘savings’ go?
The take of Crisil Research is it is more likely to be spent on discretionary items than salted away in formal savings because the rise in real returns would be marginal given that nominal interest rates are on the decline.
Other consumption boosters would be improving incomes and an increase in access to credit enabled by schemes such as Pradhan Mantri Jan Dhan Yojana.
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