Consumer Sentiment Held At All-Time Lows Even Before Covid-19 Blow

The Indian economy, which finds itself in the midst of an unprecedented crisis brought on by the spread of Covid-19, had remained weak even before lockdowns were imposed across the nation.

Forward looking surveys released by the central bank show that both consumer confidence and capacity utilisation in the economy were near all-time lows. The survey was conducted between February 27- March 7, 2020, before the spread of the coronavirus led the government to impose a nationwide lockdown on March 24.

Consumer confidence, measured by the current situation index, was at 85.6 in March 2020, close to the all-time low of 83.7 recorded in January 2020. An index value below 100 represents pessimism whereas a figure above 100 signals optimism.

Expectations for the year ahead, as gauged by the future expectations index, remained above 100, and were largely unchanged at 115.2 in March, compared to 115.1 in January.

Consumers were pessimistic of the employment scenario, price level and household income in the current situation survey. For the one year ahead horizon, they remained pessimistic of the price levels and their expectations deteriorated further.

Manufacturing companies, which had expected some some improvement in production and order books in the January-March 2020 quarter, saw a sharp turnaround in sentiment because of the economic fallout from the spread of the virus.

This was according to a quick survey conducted by the central bank between March 18-20. Of the 860 respondents, 48 responded to the repeat survey.

Capacity Utilisation Declines Further

In a separate survey, the central bank said that capacity utilisation declined to 68.6 percent in the October-December 2019 quarter, from 69.1 percent in the previous quarter. This is the lowest since the RBI begun conducting the survey from 2008-09.

Seasonally adjusted capacity utilisation also declined by 1.8 percentage points to 68.2 percent in the same quarter.

The survey provides a snapshot of demand conditions in India’s manufacturing sector. The survey, which covered 704 manufacturing companies, also showed a drop in orders received, compared to a year ago.