Consumer Confidence in Indian Economy Continues to Dip: RBI Survey

The dip in the current situation index, which started in November 2016, comes on the back of "growing pessimism on the general economic situation and the employment scenario".

New Delhi: A Reserve Bank of India (RBI) survey has shown that consumer confidence in the Indian economy has continued to dip, both since June 2014 and more recently as well.

The ‘current situation index’ (CSI) – a measure of how consumers currently feel about the general economic situation – dropped slightly to 93.9 in the latest survey round (November 2018) from 94.8 in September 2018.

In November 2014, months after the Narendra Modi government came to power, the CSI was at 111 while in November 2016 it was 109.

“The current situation index declined further in November 2018 in a phase that commenced in November 2016, on the back of growing pessimism on the general economic situation and the employment scenario as also some cutback in spending,” the survey findings note.

A separate ‘future expectations index” (FEI) – which gauges how consumers feel the situation might change in the year ahead – also moderated due to “lower optimism on the employment scenario and household spending”.

Also read: India’s GDP Debate: What Explains Reduced Growth Rates Under the UPA?

The RBI’s survey is conducted in 13 major cities and collects responses from over 5,000 people on “households’ perceptions and expectations on the general economic situation, the employment scenario, the overall price situation and their own income and spending”.

As Table 1 shows below, the responses indicate that 45.2% of the people surveyed believe that the current general economic situation has worsened from a year ago, compared to 33.2% of people who said it had improved.

More importantly, the data shows these perceptions are a sharp reversal from November 2016, when demonetisation was announced, where 49.5% of those surveyed said that the economic situation was better than a year ago and only 23.9% said it was worse.

                      Table 1 – Perceptions on General Economic Situation (Percentage responses)
Survey Round                                    Current Perception
Improved Remained Same Worsened Net Response
November – 16 49.5 26.6 23.9 25.6
November – 17 30.4 22.3 47.3 -16.9
March – 18 34.9 23.4 41.7 -6.8
May-18 32.5 19.6 47.9 -15.4
June -18 36.4 21.9 41.8 -5.4
September -18 33.7 22.1 44.3 -10.6
November -18 33.2 21.6 45.2 -12.0

A similar but more nuanced trend is seen when it comes to responses collected for a “one year ahead expectation”. A not insignificant 31.2% of people surveyed believe the situation will worsen in the year ahead, up from 18.3% of people who believed the same back in November 2016.

Also read: Where Is the Indian Economy Headed?

However, the number of people who believe the general economic situation will improve in the next year has also increased from the last survey round, from 53.2% in September 2018 to 53.6% in November 2018.

                      Table 2 – Expectations on General Economic Situation (Percentage responses)
Survey Round                         One Year Ahead Expectation
Will Improve Will Remain Same Will Worsen Net Response
November – 16 63.0 18.7 18.3 44.8
November – 17 46.8 23.3 29.9 17.0
March – 18 49.7 22.8 27.5 22.2
May-18 50.6 22.1 27.4 23.2
June -18 50.4 23.0 26.6 23.8
September -18 53.2 16.7 30.2 23.0
November -18 53.6 15.3 31.2 22.4

The RBI survey also examines expectations and perceptions on employment. Last month, it found that 47.2% believed that their employment opportunities had come down from a year ago.  

Just before the last general elections, in March 2014, only 28.7% of people surveyed believed that their employment situation had diminished.

Income growth, a  bright spot

What the NDA-II government will take satisfaction in though is that consumer perception around income growth was more solid.

In November 2018, 29.9% of people surveyed believed that their income had increased, up from 24.9% of people surveyed in November 2017.

As The Wire has also pointed out in the past, the central bank’s survey also rates the NDA-II administration higher than the UPA-II on the inflation front, although this improvement is in part due to a cooling of global crude oil prices.

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