RBI Consumer Confidence Survey: Consumers see current economic situation as significantly worse than a year ago

Indian consumers perceived that the current economic situation was significantly worse when compared to a year ago, said the Reserve Bank of India's January round of Consumer Confidence Survey.

But, the sentiments improved from the November 2020 round of the survey. However, the current situation index continued to improve from its all-time low registered in September 2020, the RBI’s January round of the survey showed.

Weak sentiments emanated from downbeat perception on the major parameters such as general economic situation, employment scenario, price levels and household incomes, when compared to a year ago, the survey showed.

The RBI conducted the survey among 5,351 households across the country. Going forward, consumers expect improvement in the general economic situation and employment conditions during the next one year, the survey showed.

The survey further showed that overall spending remains in positive territory on the back of buoyant essential spending. “Over 70 percent of respondents expect non-essential spending to remain similar or decline over the next one year,” it said.

“After reaching the historical low in May 2020 round around the peak of Covid-19 related lockdown and restrictions, the future expectations index (FEI) increased for four successive quarters and stood at 117.1 in January 2021.

Consumer confidence was taken a severe hit over the last one year due to the impact of COVID-19 and owing to the general economic slowdown. The poor consumer demand has impacted credit growth as people postponed the non-essential spending.

The Indian economy, which is projected to contract by 7.7 percent this fiscal year, is expected to pick up in the next fiscal. Announcing the latest round of monetary policy, the RBI projected the GDP growth at 10.5 percent in the next financial year.

There are some indicators of a gradual pickup in the economy from the COVID phase. These include an improvement in PMI numbers, gradual uptick in bank lending and banks reporting lower-than-expected loan restructuring requests from corporates.