Last weekend I did my annual festival market check. This year, besides the main markets of Delhi, I visited some local markets in predominately lower middle class areas; and some markets in rural areas of North Delhi. I managed to speak with some very large importer and traders of consumer goods; auto dealers, farmers, real estate developers and owners of leased properties. Based on my observations, interactions and information, I would like to share the following feedback with readers:
·
The overall demand situation this festival
season is materially worse than the last year. It is pertinent to note that the
last year was also not good per se.
·
A large importer and trader dry fruits, mainly
almonds and walnuts, indicated that global dry fruit prices are down over
25-30% as compared to last year. In India despite supply disruptions due to
broken logistic chain, the prices are lower as compared to last year. The
retail demand for almonds and walnuts has seen sharp rise as these are seen as
immunity boosters. However wholesale demand from sweet and confectionary makers
is very poor. Overall, he expects 30% lower volumes this festival season.
·
A large importer and trader of confectionary,
mainly chocolate, lamented both supply and demand issues for poor business. As
per him, import of confectionary was greatly restricted due to breakdown in global
supply chain and slow clearance of consignments at Indian ports. He cited
3months delay in clearance in his inbound shipments. On demand side, the
festival gifting demand is very slow, especially the corporate demand. Retail
sale is gradually picking up but still materially lower than last year.
·
Two famous sweet shops in Delhi have witnessed
gradual pickup in demand in past two weeks. The sales are about 50% lower as
compared to last year. The delayed and curtailed marriage season and minimal
corporate gift bookings are major sentiment dampeners. They see a definite
trend in lower affordability.
·
Textile traders, both wholesale and retail, also
cited very slow return to normalcy. None is expecting to reach the 2019 level
of demand even in 2021. The demand from rural markets in neighboring states is
very poor. Shorter marriage season, restrictions on number of guests, poor
affordability, slow return of migrant laborers, and high inventory are
bothering the textile traders. Most of them are staring at significant
inventory write off.
·
It is well known that in many communities, the
marriages are arranged with a pre-determined budget for the bride side. The
people from these communities are indicating payment of more cash &
jewelry, higher end automobile and communication devices to compensate for the
lower spending on ceremonies.
·
Building material and furniture dealers appeared
more sanguine about return to normalcy. They are seeing better than expected
retail demand for home improvement and replacement. For the wholesale demand,
inquiries are good. They hope for better start to 2021.
·
Auto demand has picked up well. Two wheelers
strong due to non-availability of normal public transport and fear of using
public transport. Cars at pre lockdown level which was not great per se.
Tractors and SUVs continue to see strong demand, reflecting the faster recovery
in rural demand.
·
Home decoration item importers and traders are
staring at a washout. With little fresh arrival and low inventory, they expect
festival sales to be 50-70% lower. Contrary to popular expectation, the demand
for Chinese items remains strong.
Marigold flower prices at Rs70-75/kg, are one third of the last
year. Even at these prices demand is poor.
·
The scene at local markets in lower middle class
colonies and slums, is that of despondency. The need for clothing, utensils,
and other household items is visible but the demand is lacking due to poor
affordability. The markets are crowded as usual but the sale is much less.
People are constantly looking for deals to suit their pockets.
·
The markets in rural areas are though much
better off. The sale is brisk and people are not averse to up-trading.
·
The real estate developers and dealers
highlighted that the number of inquiries has increased significantly in past
one month. These inquiries are however not yet converting into deals. They feel
it will pick up strongly once registration offices begin working normally.
·
Owners of leased real estate let out as PG
accommodation, working women hostel, shops etc indicated significant vacancies.
They do not expect normal tenancy at pre lockdown rental to be restored even in
2021.
·
Almost everyone complained of poor working
capital financing. NBFCs and Private sector banks have materially curtailed
working capital and small capex financing due to poor quality or illiquidity of
the collateral and tighter credit norms.
·
Almost everyone is working with lesser number of
workers compared to pre lockdown period. No one indicated returning to normal
workforce level in 2021. Most traders are focusing on survival for 2021. Growth
does not seem to be a priority for now at least.
·
Farmers in Delhi villages were surprisingly well
aware of the implications of the latest legislative changes relating to
agriculture sector in India. Most of them believed that these changes are
structurally positive for the sector; regardless of the noise being made by the
opposition parties and some NGOs. (Caveat: The infrastructure, resources and
access available to these farmers is very different from an average farmer in
the hinterland. Their opinion may therefore not be reflective of the mood in
general.)
·
Most people I interacted with and observed seem
to have accepted Covid-19 as an uninvited guest in their house which cannot be
wished away. They have learned to live with it and are willing to suffer some
losses (monetary and human life) for their freedom to work and move around. The
public campaign for safety against corona is totally ineffective in most cases
and counterproductive in many cases. For example to avoid listening to Corona
caution played before each phone call, most of the people prefer to use
Whatsapp call now. Inappropriate, dirty and unhygienic face masks are hanged
around chin to avoid monetary fines and harassment by authorities. Hand sanitizers
have vanished from most public offices. No water is available in the tanks
placed in public places for hand washing. No one could care less to discuss
whether the government handled the pandemic efficiently. They just want to move
on to lead their normal life.
