Demonetisation hits consumer buying sentiment, TRA Research says

The recent demonetisation drive by the government has hit India's consumer spending severely. India’s Buying Propensity Index (BPI) in December 2016 stood at 0.26, (measured on a scale between +1 to -1), down 0.42 BPI points from November (0.68), according to report by TRA Research.

Source: TRA Research

The period of November and December has been characterised by just a single event -- the demonetisation of high-powered currency notes. While the BPI of consumers had been growing from 0.43 BPI points in July to 0.68 BPI points in November, it saw a drastic drop in December.

N Chandramouli, CEO, TRA Research, elaborating on the BPI said, “The country’s buying sentiment was consistently recovering since July 2016, but Narendra Modi’s surprise demonetisation announcement was the biggest factor causing unnatural fluctuations in the buying sentiment of the country as reflected by the Index. The November 2016 BPI had shown a rise of 19% stemming from the initial euphoria of long term positive connotations of the announcement.”

Source: TRA Research

Chandramouli further added that the December fall was when the pain of demonetisation began to be felt more severely after the first salary cycle post-demonetization announcement in December, and the impact of the enduring business and personal hardships was felt by citizens. The buying sentiment in December seems to have fallen precipitously to the lowest in 9 months.

Source: TRA Research

The Buying Propensity Index is a result of a primary research across 3,000 consumer-influencers across the 8 Tier –I cities in India conducted every quarter.

Considering the 8 cities studies for the BPI, Delhi was most severely impacted with a month-on-month fall of 122% in citizens’ keenness-to-buy, registering a negative sentiment in December at -0.14. This was followed by Kolkata with a BPI fall of 90%.

Source: TRA Research

The three cities which showed a medium fall in BPI were Mumbai (-58%), Pune (-46%) and Chennai (-35%). The cities which had a lower negative impact of demonetization on BPI were Bangalore (-16%) and Hyderabad (-15%). Ahmedabad was totally contrary to the BPI of the other cities, falling from a high 0.63 in October to 0.46 in November.