Soaring fuel prices crowd out other spends on credit cards, says SBI Report

Pandemic has altered the spending habits of customers.

Massive rise in retail fuel prices crowded out other discretionary spends on credit cards in December, according a report by SBI Research.

Non-discretionary spends on credit cards has come back to 65% of the total spends, while discretionary spending has fallen below the trend rate of 35%, said the report authored by Soumya Kanti Ghosh, chief economic advisor at SBI group.

This has happened as spend on oil has crowded out in December spending on other essential items such as health, grocery and utility services which was the trend in earlier months.

Share of non-discretionary spend in December has jumped to 65%, the same as before the coronavirus pandemic on account of only fuel spends, the report said adding that the finding is based on spends on SBI credit cards.

The pandemic has changed the spending habits of consumers significantly and that too within essential/ non-discretionary and non-essential/ discretionary items.

In principle, the share of discretionary spending that had reached 35% of total cards spending in February 2020 had crashed to 15% in April and since April, the share of discretionary spends fluctuated wildly between 15% and 35%.

Ms. Ghosh said the single biggest factor that has driven this change is the massive spike in inflation between April and November, which on average stood at 120 bps lower than NSO inflation numbers at 6.3%.

“This has happened as spend on oil has crowded out the spending on other essential items, like health, grocery and utility services in December,” the report said.

It called for “an urgent reduction in oil prices through tax rationalisation” otherwise, “non-discretionary spends will continue to get distorted and crowd out discretionary expenses”.

You have reached your limit for free articles this month.

Subscription Benefits Include

Today’s Paper

Find mobile-friendly version of articles from the day’s newspaper in one easy-to-read list.

Unlimited Access

Enjoy reading as many articles as you wish without any limitations.

Personalised recommendations

A select list of articles that match your interests and tastes.

Faster pages

Move smoothly between articles as our pages load instantly.


A one-stop-shop for seeing the latest updates, and managing your preferences.


We brief you on the latest and most important developments, three times a day.

Support Quality Journalism.

*Our Digital Subscription plans do not currently include the e-paper, crossword and print.


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.