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India’s Inc. advertisement expenses for brand promotion and entertainment remunerations for its executives to cement closer liaison with their clientage would witness a decline of nearly 32-35% in fiscal 2009-10 due to aftereffects of meltdown which have already put severe pressures on demand and manufacturing as well.

The above findings are arrived at the Internal Assessment of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) on Ad and Entertainment Budget of Corporate India for 09-10 vis-à-vis slowdown, which highlights that a vast majority of corporates in private sector has yet to make their such budget public.

Nearly 300 companies in large and medium segment that participated in the Internal Assessment Exercise of ASSOCHAM held in last 10 days of March 2009 at Delhi, Mumbai, Chennai, Hyderabad, Pune, Kolkata and Chandigarh, 270 participants said that in the past, corporates would finalise their ad/entertainment budget towards the end of March.  This year, this exercise is not even half complete, added 90% of participants that took part in internal exercise held in series.

At each place, over 40 executives shared their experience held under aegis of ASSOCHAM with representation from corporates in areas of Fast Moving Consumer Goods (FMCG), Home and Electronic Appliances, Real Estate, Textiles, Gems & Jewellery and Luxury Products.

Releasing the ASSOCHAM assessment, its Secretary General, Mr. D S Rawat said that not only private sector ad and entertainment budget is going to shrink by 32-35% in entire fiscal 09-10 but the situation would more or less remain likewise in public sector, especially in its Scheduled B, C, D category companies.

According to ASSOCHAM, in automobile and FMCG sector, corporates during boom time would spend 10-12% of their total earnings by releasing advertisements through all available modes such as electronics, print and periodicals/publications in vernacular also.

The emerging situation is so bad that despite electronic and print media have already curtailed their ad cost by nearly 25-30% with luring offers for heavier discounts, corporate earnings declined so much in 2008-09 that majority of them are still dithering to fix allocations for ad and entertainment.

Mr. Rawat also pointed out that leading newspaper dailies, which in the past would come out with thicker and heavier weekly pullouts, advertising space, job opportunities and bigger advertisement portraits for brand promotion have reduced their size by almost half, which indicates that corprorates are not making use of space available in such pullouts.

This has happened because annual earnings of corporates are shrinking as there is hardly any demand as a result of  which manufacturing is under severe constraints, even though input costs have fallen down. This has resulted in shrinkage of demand, which is happening because there is no liquidity in the market and buyer’s purchasing power has come under severe pressures.

According to ASSOCHAM assessment, the ad promotion activities and enhancement in entertainment and other allowances will pick up after the current turmoil in the economy grows over, which will consume nearly 10-12 months.

One of the reasons as to why cost cutting in corporate world is taking place not only in ad, entertainment and administrative front but also their charitable activities are restricted for want of funds but the consensus in most of corporate houses is that employees are not hurt.

The ASSOCHAM is of the view that after the new government is constituted in the month of May June 2009 and it presents its full Budget  in July, with focus on fiscal and monetary relaxations will determine market sentiments for growth. If the growth oriented budget is not presented due to political compulsions, India’s growth story could receive a hit, concluded Mr. Rawat.

Source: ASSOCHAM

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