It has been reported that The Consumer confidence in the country continued to improve from the historic low recorded in July 2021 but the assessment for the current period remained in pessimistic terrain, says a survey by the Reserve Bank of India.
The current situation index (CSI) increased to 62.3 in November 2021 from 57.7 in the previous survey round in September, says the RBI’s consumer confidence survey. CSI was 48.6 in July this year. The latest rise is mainly due to the rise in consumer spending with the current spending index rising from 41.9 to 47.1. However, the current perceptions on economic situation, employment, price level and income are still in the negative terrain.
Households were more confident for the year ahead, which was reflected in the continued upward trajectory of the future expectations index (FEI), buoyed by higher optimism for household income and employment scenario, the company said.
Economic Situation
The index for one year ahead expectations rose to 109.6 in November from 107 in September, the RBI said. The index for overall economic situation improved to 5.2 (one year ahead expectations) in November from 1.5 in September this year. The perception for the general economic situation, employment scenario and household income displayed signs of recovery, the company said.
With higher expenditure on essential items, households perceived a rise in overall expenditure. Sentiments on non-essential expenditure, however, continue to be pessimistic and did not reflect improvement over the coming year. The survey was conducted through physical interviews, during October 25 to November 3, 2021 in 13 major cities.
What has fuelled the growth in spending is the decline in Covid cases from September this year. With the anticipated third wave remaining muted, businesses opened, and lockdown curbs were lifted across the country. Simultaneously, pent-up demand also rose sharply, leading to more footfalls in malls and markets across the country.
Reserve Bank of India (RBI)
According to RBI data, the credit disbursement in the two fortnights ended November 5, 2021 (covering Diwali, Dussehra and Navratri) amounted to Rs 150,278 crore, significantly higher than that in 2020, when it amounted to Rs 81,361 crore in the two fortnights covering the three festive periods, the company said.
Meanwhile, in another RBI survey on inflation expectations, households’ median inflation perceptions for the current period increased by 20 basis points, reaching 10.4 per cent in November 2021, while three months and one year ahead median inflation expectations increased by 150 and 170 basis points, respectively, from the previous survey round.
Households expected inflation to harden in the near and medium term, as the gap between current perceptions and future expectations widened for both time horizons.
The proportion of respondents expecting higher inflation in the next three months and over the year ahead rose in November 2021. Expectations for overall prices and inflation were generally aligned to those for non-food commodities, the company said.
Monetary Policy
In the monetary policy unveiled on Wednesday, the RBI has kept its inflation forecast unchanged at 5.3 percent for FY22, signalling that it believes inflation to be more transient than permanent in nature. It expects CPI inflation to peak in Q4 FY22 and moderate thereafter. “We do not see the inflation trajectory to be as benign and expect inflation prints to surprise on the upside and average at 5.6 percent for FY22, driven by elevated input and fuel costs and as the base effect wanes off.
The risk of prolonged elevated core inflation feeding into household expectations and becoming more entrenched in the system remains,” said Abheek Barua, Chief Economist, HDFC Bank.
“We expect CPI inflation to climb back above 6 percent from Dec-21 onwards led by higher input prices and as the base effect drops off,” the company said. (indian express)
