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.
- Current Sentiment:
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.