The decisive and pro-reform new government has helped in improving confidence of consumers who are now willing to spend in the coming months, says a survey.
According to ZyFin Research, a financial research and analytics company, it's consumer outlook index improved to 42 in May, from 40.6 in the previous month. A score above 50 reflects optimism while below 50 indicates pessimism.
"This increase is based on a sizable recovery in consumers' willingness to spend in the coming months. This can be an early indication of improving sentiments, linked to a strong government infused with all the parliamentary muscle required to initiate and push through reforms," ZyFin Research said.
The index is based on a monthly survey of 4,000 consumers across 18 cities categorised into metros, Tier I and Tier II.
The top five cities with the highest scores this month were Mumbai, Hyderabad, Mangalore, Chennai and Bhubaneswar.
The survey said consumers continue to observe a stagnant macro-economy, reporting negligible improvements in employment and inflation sentiment.
Until concrete policy reforms show results, consumers are likely to remain unmoved on these fundamental macro issues, it added.
"With the RBI signalling a softer interest rate regime, we expect consumers' willingness to spend to improve over the next three to four months. This would ensure the much-needed revival in the auto and real estate sectors, which are key to providing a boost to the sagging economy where 55 per cent of GDP is composed of private spending," ZyFin Research chief economist Debopam Chaudhuri said.
Among the index components, the Inflation Sentiment Index, the largest inflationary expectations survey globally, moved up to 25.6 in May 2014 after two months at 25.1, reflecting a moderate improvement in sentiment towards inflationary conditions.
The Spending Sentiment Index improved for the first time since December 2013, to 28.1 in May from its lowest-ever level of 25.9 in the last month.
Another key component, the Employment Sentiment Index extended its stay within optimistic territory to five months, but remains almost unchanged.
The index improved marginally to 51.7 in May 2014, from 51.6 in the previous month, the survey said.