File photo of RBI Governor Shaktikanta Das | ANI
File photo of RBI Governor Shaktikanta Das | ANI
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New Delhi: The Reserve Bank of India’s consumer confidence survey released Friday shows that Indian households have never felt worse about the economy, but they are relatively more confident about the situation in a year’s time.

The consumer confidence index (based on the current situation) for September plunged to a record low of 49.9, from 53.8 in July and 63.7 in May.

The third successive low came as respondents perceived “further worsening in the general economic situation and employment scenario during the last one year,” the survey said.

The survey captures consumer sentiments across parameters such as general economic situation, employment scenario, overall price situation, income and spending. It was conducted across 5,364 households in 13 major Indian cities, and saw respondents reporting a curtailment in both overall and essential spending during the past one year, when compared to the last survey round.

Also read: RBI says GDP will contract by 9.5% in FY21, holds repo rate at 4% amid modest recovery

Hope for the future

The future expectation index had fallen below 100 in May for the first time since Narendra Modi came to power, then recovered to 105.4 in July, and has now risen to 115.9 in September.

If the future expectation index falls below 100, it indicates that people think the future may be worse than the present.

“The consumer confidence for the year ahead improved in the September 2020 round, driven by improved sentiments on the general economic situation, the employment scenario and income. The current situation index, however, fell to an all-time low in September 2020,” the RBI said in its monetary policy report released on Friday.

“Consumers expect improvements in general economic situation, employment conditions and income scenario during the coming year; discretionary spending, however, is expected to remain low in the near future,” it said.

RBI governor strikes positive note

The RBI has forecast that the Indian economy will contract by 9.5 per cent in 2020-21. However, it has said the economy could contract further by 11.5 per cent if some downside risks come into play — including a second wave of Covid-19 infections, persistent inflation pressures, higher fiscal deficit and public debt, and heightened volatility in capital flows and exchange rates.

However, RBI Governor Shaktikanta Das was optimistic while addressing the media Friday.

“The mood of the nation has shifted from fear and despair to confidence and hope. Some of this optimism is being reflected in people’s expectations…. Our other surveys, also conducted in September, indicate that consumer confidence is turning upbeat on the general economic situation, employment and income over a one-year-ahead horizon,” he said.

Das added that while the current assessment of the overall business situation remains in contraction in Q2, it has moved up from a low point in Q1.

“Forward-looking business expectations are optimistic on the overall business situation, production, order books, employment, exports and capacity utilisation,” he said.

Das also pointed out how the rural economy looks resilient, migrant labourers are returning to work in urban areas, and factories and construction activity are coming back to life.

Also read: RBI’s new MPC should focus on transmission. Without that, more rate cuts can be pointless


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