New Delhi: The Reserve Bank of India’s consumer confidence survey, released Thursday, shows that Indian households have never been more pessimistic about the economy, falling incomes or employment prospects than at present.
The current situation index (CSI) touched a historic low of 63.7 in May 2020 round of the survey, as against 85.6 in the study conducted in March this year.
Respondents in the survey were also dejected about the next one year. The future expectations index fell below 100 to 97.9 in May 2020, from 115.2 in March. It has fallen below 100 for the first time during the Narendra Modi government’s tenure.
The survey captures consumer sentiments across parameters such as general economic situation, employment scenario, overall price situation, one’s income and spending.
Results of the survey are also indicative of the further expected deceleration in consumption expenditure since households, anticipating job losses and economic slowdown, will reduce their spending.
“Consumer perception on the general economic situation, employment scenario and household income plunged deeper into contraction zone while expectation on general economic situation and employment scenario for the year ahead were also pessimistic,” the survey says.
The survey further shows that consumers made sharp cuts in discretionary spending since they expect the current situation to continue in the year ahead. Spending on essential items by households supported overall consumer spending, says the report.
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Households expect sharp increase in inflation
The survey was conducted through telephonic interviews across 5,300 households in 13 major cities, including Delhi, Mumbai and Ahmedabad which have been among the worst hit by the pandemic.
Indian economy is headed towards a recession in 2020-21, RBI governor Shaktikanta Das had acknowledged last month.
Economists had also pegged the full year growth contraction anywhere between 5-12 per cent.
The government’s decision to impose a lockdown to battle the Covid-19 pandemic have brought most economic activity to a halt for more than two months. This also led to loss of livelihoods and jobs, forcing many migrant labourers to go back to their native places.
The households inflation expectations survey released by the RBI also showed that families expect a sharp increase in inflation in the coming months on account of rising food prices.
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It will be a painful climb out of the trough. The government should open its doors to good advice from all quarters.