India’s consumer confidence has hit an all-time low due to a bleak economic scenario, job losses and falling incomes amid the disruption caused by the coronavirus pandemic.
India’s consumer confidence has hit an all-time low due to a bleak economic scenario, job losses and falling incomes amid the disruption caused by the coronavirus pandemic, according to the Reserve Bank of India. “Consumer perception of the prevailing economic situation, employment scenario, and own income was significantly lower than that in May 2020,” an RBI survey said on Thursday. Those who were surveyed still possess some optimism about these parameters for the coming year vis-a-vis the previous survey round, the RBI survey report added. The future expectations index (FEI) has also gone back to positive territory indicating signs of recovery in the coming year. Consumer confidence fell from 63.7 in May to 53.8 in July.
Impulse buying goes down
The ongoing coronavirus pandemic has taken a toll on the economy and incomes which has led to a decline in consumer discretionary spendings. In fact, most respondents surveyed by the central bank said that they have reduced impulse buying. However, overall spending has seen a hike during the last one year. Since the economic outlook remains bleak, consumers are unlikely to increase non-essential spending in the coming year as well.
Households expect inflation to rise
Meanwhile, households also reported an inflation expectation increase by 60 basis points in July as compared to May. The current median inflation perception rose to 9.9%, according to the survey.
Per RBI’s MPC statement, inflation is expected to rise in the food items category due to supply chain disruptions amid coronavirus pandemic. Other reasons such as “relatively moderate increases in minimum support prices (MSP) for the kharif crops and monsoon are also supportive of benign inflation prospects,” RBI said in its statement. However, a healthy rabi yield may have some softening impact on cereals prices.
For its Consumer Confidence Survey, RBI conducted telephone interviews during July 1-12, 2020 in thirteen major Indian cities. Perceptions and expectations on various indicators such as general economic situation, employment scenario, overall price situation and own income and spending were obtained from 5,342 households across these cities.