India's Tale of Two Worlds: Navigating Consumption Post-Pandemic

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Happy Hump Day and welcome to the 69th edition of Weekly Olio - your trusty source for giggles, wisdom, and a dash of intrigue courtesy of our tantalizing thought piece (yes, buckle up for Publisher's Parmesan). 🧀

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The Quote󠀢 💭

The Tweet 🐦

Repo and reverse repo are two of the fundamental instruments used by central banks all over the world to control liquidity in the banking system. This thread is a great primer on how these rates function and why the US Fed is rapidly draining its Reverse Repo facility.

The Infographic 💹

There are certain sectors/ themes that have been more amenable to venture capital investments. This chart captures the significant contribution of venture capital funding to the growth of both mobile and AI. Interestingly, funding rises till a theme matures and then falls rapidly allowing new themes to get funded.

The Short Read 📝

The Danger of Forgetting the 2023 Banking Crisis - by Raghuram Rajan and Viral Acharya

It is almost one year since Silicon Valley Bank collapsed sending shockwaves through the world of startups and venture investors all over the world. In its aftermath, a bunch of regional banks collapsed and the Fed had to step in to prevent contagion in the financial system.

While prompt action from the US Fed and the Treasury helped avert a large banking crisis and allowed public attention to move on, open questions still remain. Some of the smaller banks acquired by their larger counterparts continue to show losses. There hasn’t been a wider inquiry into the circumstances that led to this situation - was it the pandemic-era stimulus or a regulatory oversight? The public narrative might have moved on but it is imperative to answer these questions - who knows what time bomb we are sitting on?

The Long Read 📜

Zapier: The $7B Netflix of Productivity - by Jan-Erik Asplund

Zapier has been one of the most successful companies in the last few years. It acts as a connecter between almost any two apps on the internet. As the article rightly says, Zapier is a no-code super aggregator.

This article characterizes Zapier as the Netflix of productivity - it is the place where business logic lives - which specific apps deliver that business logic is almost incidental. Despite raising only $1.4M in venture funding, Zapier has grown to $100M in revenues in less than 10 years. This article is a deep dive into Zapier’s business model and does a great exercise of estimating its valuation. As the number of public APIs increases and as the number of SaaS apps used by an average business increases, Zapier’s ability to string them together is likely to become more valuable. However, the rise of Zapier has also led to the rise of a lot of competitors and we are seeing SaaS apps offer abilities to integrate in-house. How it plays out in the long run, especially with the rise of AI, remains anybody’s guess.

🎉 Drum roll, please! 🥁 Let's give a hearty round of applause to our guest post writer, Naman Varma! 📜🎩

Naman is a seasoned professional with 6 years of experience in the FMCG industry and has recently moved to Switzerland. Previously, he has worked with Reckitt and PepsiCo.

Publisher’s Parmesan 🧀

India's Tale of Two Worlds: Navigating Consumption Post-Pandemic

India's consumption trend has been on the path of recovery since the pandemic, but there are still some challenges. High-end products such as luxury apartments, fancy cars, and top-end consumer goods are selling well, while malls, restaurants, and hotels are witnessing a surge in demand, driving up prices. However, the fast-moving consumer goods (FMCG) segment is still struggling to achieve double-digit growth, with low sales of biscuits, soaps, shampoos, and perfumes.

Following the severe impact of the COVID-19 pandemic, India experienced an initial recovery as lockdown restrictions eased and economic activities resumed. Sectors such as FMCG (Fast-Moving Consumer Goods), e-commerce, and consumer durables witnessed a rebound in consumption patterns.

Shift in Consumer Behavior: From Brick-and-Mortar to Click-and-Order

The pandemic caused significant shifts in consumer behaviour, with a preference for online shopping, increased focus on health and hygiene products, and a move towards digital services such as online education, entertainment streaming, and telemedicine.

The COVID-19 pandemic has further accelerated the already increasing adoption of e-commerce in India. With the implementation of lockdowns and social distancing measures, consumers have increasingly turned to online platforms for their shopping needs, including groceries, household essentials, electronics, and clothing. This shift towards e-commerce is likely to continue as consumers continue to prioritize convenience and safety.

During the pandemic, contactless payments and digital transactions have gained prominence as people sought to minimize physical contact. Mobile payment applications, digital wallets, and online banking services have seen increased usage as consumers embraced cashless payment methods. This trend is expected to continue as digital payment infrastructure expands and becomes more accessible.

Rise of Home Entertainment and Online Content: Redefining Leisure in the Digital Era

Due to restrictions on outdoor activities and entertainment venues, people's demand for home entertainment options increased significantly. They started relying more on streaming services, online gaming, and virtual events to keep themselves entertained. As a result, people spent more time consuming digital content and engaging in indoor leisure activities. This shift in their behaviour brought some changes in their media consumption habits.

Focus on Health and Hygiene: Nurturing the Body and Mind

Due to the pandemic, Indian consumers have become more aware of health and hygiene practices. As a result, there has been a surge in demand for health-related products such as immunity boosters, hygiene essentials, and wellness services. Consumers are now more conscious of product safety, cleanliness standards, and health certifications while making purchasing decisions.

Support for Local and Sustainable Brands: A Return to Roots

During the pandemic, there has been a noticeable increase in the number of people supporting local businesses and sustainable brands. People are now more interested in buying locally sourced products, artisanal goods, and eco-friendly alternatives. This change in consumer behaviour reflects a growing desire to promote environmentally responsible practices and contribute to local economies.

The economic uncertainties and job losses caused by the pandemic have led Indian consumers to be more cautious with their spending. They are now placing a greater emphasis on the value for money, discounts, and deals when making purchasing decisions. Consumers have become more price-sensitive and are focusing on buying only essential items, leading to changes in their spending priorities.

Rural Resilience: The Heartbeat of a Nation

India's rural economy remained resilient during the pandemic, despite facing disruptions in supply chains and labour shortages during the lockdowns. This sector accounts for a significant portion of consumption, and government initiatives such as increased rural infrastructure spending and direct cash transfers helped support rural demand.

The agricultural sector in India fared relatively well during the pandemic, thanks to favourable monsoon rains, government procurement of crops at minimum support prices (MSP), and policy support for agriculture. These measures helped mitigate the impact of the pandemic on rural incomes and provided stability to farmers' incomes and rural economies.

As a result of the pandemic and lockdown restrictions, rural consumers adjusted their spending patterns. They focused on essential items such as food, healthcare, and hygiene products while reducing discretionary spending on non-essential items. Consumers prioritized essentials over discretionary purchases, which led to changes in consumption patterns and preferences.

Policy Support: Navigating the Winds of Change

The Indian government implemented various policy measures to boost the economy and encourage consumption during the pandemic. These measures included fiscal stimulus packages, tax reforms, and infrastructure investments. However, some sectors needed more targeted interventions for these measures to be effective.

To support individuals, businesses, and sectors adversely affected by the pandemic, the government announced several fiscal stimulus packages. These packages included measures such as income support for vulnerable sections of society, loan guarantees for small businesses, subsidies for key sectors like agriculture and healthcare, and tax relief measures.

The government expanded its Direct Benefit Transfer (DBT) program to provide financial assistance directly to individuals and households affected by the pandemic. DBT schemes included cash transfers, food subsidies, and assistance to farmers, migrant workers, and other vulnerable groups.

To boost consumption and investment in key sectors of the economy, the government introduced sector-specific reforms and policy measures. This included initiatives such as the Production-Linked Incentive (PLI) scheme to promote manufacturing, infrastructure development projects, reforms in agriculture marketing and supply chains, and incentives for the housing sector.

The government prioritized infrastructure investments as a means to stimulate economic activity, create employment opportunities, and spur consumption. Infrastructure projects such as road construction, urban development, railways, and renewable energy initiatives were accelerated to drive economic growth and enhance productivity.

To encourage consumption and investment, the government announced tax reforms and incentives. This included measures such as reduction in corporate tax rates, rationalization of GST (Goods and Services Tax) rates, incentives for startups and MSMEs (Micro, Small, and Medium Enterprises), and measures to boost consumer spending during festive seasons.

India's consumption story weaves a tale of resilience, adaptation, and renewal. As the nation faces the complexities of a post-pandemic world, it does so with optimism and determination, forging ahead towards a brighter tomorrow. In the words of Rabindranath Tagore, "Faith is the bird that feels the light when the dawn is still dark." As the dawn breaks on India's consumption landscape, let us embrace hope and chart a course towards a future filled with promise.

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