The last four months have brought tremendous change in the financial habits of Indians.
ET Money’s report ‘India Lockdown Spends’ shows that individual savings have increased substantially during lockdown due to reduced expenses.
The RIA conducted an elaborate analysis of the spending data of its users during the lockdown months of March, April, May and June. The report reveals that overall spending during these four months have reduced by 40% compared to the corresponding period last year.
Analysis of individual’s monthly expenses shows that there has been a dip in household expenses because of supply chain disruption and delivery to essentials during the lockdown. Besides, people have also cut back on their monthly household budgets given the income uncertainty.
Another key reason was limited use of cash. Movement restriction and the fear of using paper currency have had the biggest impact on cash as a preferred mode of payment, says the report.
Overall, discretionary spending has come to a grinding halt with entertainment, travel and dining seeing the biggest drop due to the lockdown coupled with a general fear among people and income uncertainty. Such a spending fell consequently each month from 56% in March, 14% in April, 25% in May and 31% in June, shows the report.
Further, the falling expenses have made room for more savings. Today, the need for financial planning has risen more than ever before, says the report. In fact, several other reports indicate an upsurge in demand for financial planning to create an emergency fund, retirement fund amid the health crisis.
Swarup Mohanty, CEO, Mirae Asset Mutual Fund believes that the lockdown has created a need for financial planning more than ever before. “Now is the time for MFDs to approach new investors. In fact, at fund house level, we have identified this opportunity and made consistent effort to get in touch with more and more investors on a regular basis. Recently, we have started conducting two educational webinars for investors every day. In these webinars, we address common queries of investors on mutual funds and personal finance.”
Jimmy Patel, MD & CEO, Quantum Mutual Fund observes that although the current situation creates a need for financial planning, people have been reluctant to invest in equities. “MFDs should focus on demystifying several myths of investors related to mutual funds to regain their trust,” he said.
