Ashika Monthly Insight August 2016

AUGUST 2016
DESCRETIONARY SPENDING
consumption expenditure on automobiles of more than
20% the following year, compared with 7.4% yoy in the
year prior. The penetration of two-wheelers in the
government employee segment is high; therefore, the
passenger vehicle segment will likely be the key
beneficiary of salary increases due to implementation of
7th PC. Expectation of strong rural income on the
backdrop of good monsoon this year would also push the
demand for passenger vehicles and two wheelers.
Real estate: 7th PC will have a positive impact on the
realty sector and provide opportunity to middle class
government employees to own a house with the
increased disposable income. Hike in salary indicates an
increased spending power and better economic growth.
The real estate sector is already reeling under pressure
owing to high unsold inventory across the country and
tepid economic growth. Developers are offering discounts
to get buyers back into the market. 7th Pay Commission’s
is seen as a step that would boost the demand and home
ownership sentiment. Real estate market was a major
beneficiary during last 6th PC cycle but during 7th PC the
growth could be muted due to high prices of properties
as compared two last pay hike in 6th PC and no lump
sum arrears which can be used to make the down
payment to book a house. It has been noticed that realty
prices witnessed sharp appreciation in second half of
decade by increasing 51% between 2009-2015.
Consumer durables: Consumer spending will be on the
rise owing to an increase in government employee
income levels by 23.55% due to 7th PC. According to
CEAMA’s President (Consumer Electronics and Appliances
Manufacturers Association), with the rise in disposable
income and scaling of e-commerce, the consumer durable
industry is expected to grow by 15 % during FY17.
During 6th PC the sales volume of Air conditioners rose
by 27% yoy during 2009 from 4.8% yoy growth in 2008.
Demand for consumer durable products would improve
due to increase in disposable income, which will be due
to 7th PC and higher farm productivity amid good
ongoing monsoon.
Domestic car and two wheeler sales volume rose post 6th PC
Source: SIAM
ACs volume rose sharply post 6th PC
Source: Company data
Source: Industry report
Apparel and footwear volumes witnessed robust growth post 6th PC
Source: Company data
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