Published on: December 12, 2024

DECLINE IN INDIAN CONSUMERS’ CONFIDENCE

DECLINE IN INDIAN CONSUMERS’ CONFIDENCE

NEWS – The Reserve Bank of India’s (RBI) latest surveys reveal a weakening in Indian consumers’ confidence concerning the general economic situation, employment, income, and spending habits.

CONSUMER CONFIDENCE SURVEY (CCS)

  • Overview
    • Conducted bi-monthly by the RBI, covering 19 major cities.
    • Evaluates households’ current perceptions and one-year-ahead expectations on various economic parameters.
  • Key Findings (November 2024)
    • Current Sentiment:
      • Current Situation Index (CSI) dropped to 94.0 from 94.7 (September 2024).
      • Decline due to weaker sentiments in economic and employment scenarios, despite increased household spending.
    • Future Expectations:
      • Future Expectations Index (FEI) rose marginally by 0.5 points to 121.9.
      • Optimism regarding future income and spending persists, except for prices.
    • Spending Outlook:
      • Anticipated higher spending in the coming year on both essential and non-essential items.

INFLATION EXPECTATIONS SURVEY

  • Current Inflation Perception
    • Median perception increased by 30 basis points (bps) to 8.4%.
  • Future Inflation Outlook
    • Three-month horizon: Marginal moderation to 9.1%.
    • One-year horizon: Increased by 10 bps to 10.1%.

RBI’S INFLATION FORECAST ADJUSTMENTS

  • Revised Forecasts for FY2025
    • Overall inflation: Raised to 4.8% from 4.5%.
    • Consumer Price Index (CPI) Inflation:
      • Q3 FY2025: Revised to 5.7% from 4.8%.
      • Q4 FY2025: Revised to 4.5% from 4.2%.
    • Reasons for Increased Inflation Expectations
      • Rising food prices.
      • Higher housing-related expenses.

CONSUMER CONFIDENCE SURVEY INDICATORS

  • Current Situation Index (CSI):
    • Measures perceptions of current economic conditions compared to a year ago.
  • Future Expectations Index (FEI):
    • Reflects optimism or pessimism about economic conditions over the next year.

SIGNIFICANCE OF CCS

  • Economic Impact:
    • High consumer confidence correlates with increased spending and economic growth.
    • Low confidence can lead to reduced consumption, potentially slowing economic activity.
  • Policy Implications:
    • Helps the RBI and policymakers gauge public sentiment to adjust monetary and fiscal policies accordingly.