Bags are displayed in the window of a leather goods store in the Dharavi area of Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)  

Consumer Confidence Fell Further In November, RBI Survey Shows

Consumer confidence in India deteriorated in November mainly due to a decline in optimism over the country’s economic growth and the employment situation.

According to the Reserve Bank of India’s consumer confidence survey, both current situation index and the future expectations index saw a “significant drop”. The current situation index has remained in the "pessimistic zone" for the fourth successive round of survey, it added.

The consumer confidence index reading fell to 91.1 in November from 95.5 in September. A reading below hundred is percieved to be pessimistic. Future expectations for a year ahead fell to 114.7 from 118.8 in September.

The employment situation continued to be a major concern of the respondents.
RBI Consumer Confidence Survey

Indian households’ current perception of the economic situation has declined further for the fifth successive survey round, the survey said. Even their forward outlook has tempered but stayed in positive territory.

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Consumer sentiment on income also dipped further into the pessimistic zone as an “increased number of respondents perceived their income declining during the last one year”, the survey said. Their outlook was also downbeat due to feeble sentiment on employment, the survey added.

However, a large number of respondents said they spent more despite the pessimism on future income. This could be “partly attributed to higher prices”, said RBI. Spending is expected to remain elevated over the next one year.

Respondents’ outlook on India’s prices and inflation too has continued to fall.

Higher Inflation Expectations

More than 80 percent of respondents in the RBI survey expect general prices to increase over the next quarter. Over half of them also anticipate higher inflation.

There was a marginal increase in inflation expectation for all product groups over both three months ahead and one year ahead horizons, when compared with the last survey round.
RBI Households’ Inflation Expectations Survey

The survey showed that the one-year ahead median inflation expectation has increased by 60 basis over the previous round in September. However, compared to November last year, one-year forward inflation expectations have softened by 150 basis points.

Most respondents’ expectation for higher inflation stems from their expectation that food prices will continue to rise, the survey suggested.

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