Personal Care Takes a Backseat
With lockdowns underway, demand for the personal care category within the overall consumption basket has taken a hit. Products like shampoos, face washes, sunscreen lotions, and makeup kits are seeing lesser demand.
Data intelligence platform Bizom sees a potential decline of 33.8% MoM in April in the sales of personal care products. However, demand has increased for products like soaps, sanitisers which are more essential in nature.
This trend is similar to that of last year. People are again stuck in their homes and with lesser socializing opportunities, discretionary products i.e. the personal care products, found themselves pushed down in the priority list.
Warning of Demand Shock
The RBI sees consumption aversion post-second COVID-19 wave as a great threat to the economy. India's central bank has taken about the 'demand shock' in its latest economic report.
It means that consumers are unlikely to return in a hurry. And the situation could be completely different from last time, where the market witnessed a strong pent-up demand post ease in lockdown.
The report further suggests that the companies have learned their lessons from last time and managed their supply chain really well. It has kept the market well stocked up to meet the demand. However, consumer offtake is likely to remain slow due to restricted mobility, unpredictable employment situation, and cut on discretionary spending.
There was a strong pent-up demand last time around as rural markets remained in excellent shape and led the consumption. However, even this segment is battered under the impact of the second COVID-19 wave. This could be the major reason behind RBI's fear of a long spell of demand drought. In addition, the urban centres have not yet recovered.
Elevated Trade Deficit
India’s trade deficit rose to USD 15.1 bn in April, up by USD 1.2bn on an MoM basis.
Exports are catching up with other emerging markets like China and Korea after being a laggard for several months. Exports grew at a healthy pace of 8% on a 2Y CAGR basis. Imports grew at 4% on a 2Y CAGR basis. Ex-oil and gold imports were up 3% for the month.
India's trade deficit is expanding despite the handsome growth in exports. It is largely on account of higher gold imports. It has been above USD 5bn for the third month in a row.
The trade deficit would narrow down in the coming months if gold imports reduce from the current level. Oil is another major component of India's overall import mix, which too is likely to moderate due to the restricted movements across the country.