NEW DELHI: Consumer confidence in India is at the highest level since mid-2019, according to the latest bi-monthly survey conducted by the Reserve Bank of India on Friday. “Consumer confidence for the current period has been on a path of sustained recovery; respondents assessed improvement in all survey parameters; the current situation index (CSI) rose by 3.4 points to 98.5 – its highest level since mid-2019,” the survey said.
The sanguine survey results come at a time when some analysts have started seeing signs of a recovery in rural consumption.
The survey was conducted during March 2-11, 2024, covering 6,083 respondents, with female respondents accounting for 50.8% of the sample.
Respondents were upbeat about all economic parameters–economic situation, employment, price level, income, spending, and consumer confidence index.
According to the survey, the ‘future expectations index’, which gauges consumer sentiment for the upcoming 12 months, also improved to its highest level since mid-2019.
The households’ perception of inflation expectations for both three months and one-year ahead moderated by 20 basis points (bps) each to 9.0% and 9.8%, respectively, in March from the levels in January, another survey by the central bank revealed.
“The share of households expecting overall prices and inflation to increase over the next three months and one year moderated for general prices as well as for most of the product groups, when compared to the previous survey round,” the RBI said.
The parameters are: economic situation, employment, price level, income, spending, and consumer confidence index. Higher optimism resulted in the future expectations index (FEI) rising further by 2.1 points to 125.2 – also its highest level since mid-2019, the RBI said.
The household inflation expectation survey (HIES) results, released post the RBI’s monetary policy announcement, reflect the efforts of the central bank to tame inflationary pressures. RBI Governor Shaktikanta Das on Friday said that the central bank’s ongoing effort is to ensure fuller transmission of policy actions and “anchoring” of household inflation expectations.
“High and persistent food inflation could unhinge the anchoring of inflation expectations which is underway,” said Das during this monetary policy address.
Households’ inflation expectations are crucial for the RBI to matter as they depict where consumers expect the inflation rate to be in the coming future. In case, households feel inflation would be higher, that would act as an incentive for businesses to raise prices, which would in fact lead to an actual rise in prices.
Moreover, an increase in household inflation expectation, would consequently make consumers negotiate for higher wages. This in turn will force companies to hike prices, resulting in a wage price spiral, say economists. But the present results show a moderate-picture of future inflation outlook. The RBI has projected retail inflation to average 4.5% in FY25.
Median inflation expectation was relatively low for respondents below 25 years in age among all age-groups; in the occupation category, it was lower among financial sector employees, the RBI said.
Households’ expectations on general price for one year horizon remained closely aligned with food prices and housing related expenses, it said.
About 75% households expect housing prices to be higher, or rather the main driver of inflation one year ahead, while for other products, such as food, non food, and services, the inflation expectation of households have moderated.
The March-HIES was conducted during March 2-11, 2024 in 19 major cities, with responses from 6,083 urban households. Female respondents accounted for 50.8% of this sample, said the RBI.
Source: The Financial Express