The Reserve Bank of India’s Consumer Confidence Survey, a measure of consumers’ perception of the prevailing economic situation, was conducted in the first half of March 2023 across 19 cities. Mint analyses the survey results, released this month:
What does the survey show?
It estimates current perceptions and a year-ahead expectations on the economy, employment, price, income and spending. It shows that consumer confidence continues to recover from its historic low of mid-2021, but still remains pessimistic at 87.0, i.e. a 2.2 point increase from previous results. A value of 100 separates optimism from pessimism. The assessment of inflation conditions improved for the current period reflecting a higher confidence in prevailing economic conditions. With regards to spending, sentiments were positive with signs of improvement compared to the last round conducted in January 2023.
What about future expectations?
The outlook for the year ahead was marginally lower in optimism. While the sentiment on employment is nearing the levels seen in mid-2019, consumers are also optimistic about the future employment outlook and expect employment conditions to improve over the next one year. On the flip side, while there are positive sentiments on the country’s future economic situation, there has been a marginal dip compared to January 2023 data. This reading is in concurrence with the IMF lowering its growth projection for 2023-24 to 5.9% from its earlier projection of 6.1%.
How does it compare with the prevailing scenario?
Households spent more on both essential and non-essential items. With retail inflation easing to a 16-month low of 5.66% in March and rural and urban inflation at 5.51% and 5.89% respectively, rural sales of fast-moving consumer goods rose sharply in Q4 of FY23. More than a third of households expect to spend more on non-essential items over the next year.
What do credit numbers indicate?
IMF projections notwithstanding, India continues to be the fastest growing major economy in the world. Credit growth numbers indicate a rise in consumer spending. It was 15% in FY23, with non-food bank credit growing 15.9% in February 2023 from 9.2% a year ago. Driven by housing loans, personal loans grew 20.4% in February from 12.5% a year ago. To be sure, below normal rains in June-September could prove to be dampener, which would delay consumption recovery in rural India.
What should we watch out for now?
Starting mid-May, state assembly elections are lined up, followed by general elections next year. That could mean relief from rising prices of petroleum products, leaving more disposable income in the hands of consumers. Polls spread over a year would see more money circulated for election expenses, boosting the economy. Experts anticipating a marginal fall in economic growth may not factored in the electoral process.
Jagadish Shettigar and Pooja Misra are faculty members at BIMTECH.
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