New Delhi: The Centre for Monitoring Indian Economy or CMIE’s index tracking consumer sentiments in urban India has crashed to a four-month low.
Business Standard analyses that the “decline follows a surge in 2023 that saw the urban index hit its highest level in 46 months in December 2023,” but after that there has been a shrinking and slowdown, and the index has declined “for three consecutive months.”
CMIE data suggests that rural and urban indices are both lower than they were in 2019. The overall index is down 2% in March 2024, compared to March 2019. It is down by 4.5% for urban families, and 0.3% for rural families, over the same period.
The slump is evident across all the income groups in the country. “The lowest income segment – earning less than or equal to 1 lakh a year, has shown a decline of 7.1% in consumer sentiment as of March 2024, compared to March 2019.”
Those on the other side of the income spectrum display the same trend, of decline in consumer sentiment.
Those “earning between Rs 1 lakh and Rs 2 lakh per annum, experienced a fall by 6.4%, while the income group of 2 lakh and 5 lakh experienced a decline of 5%. Those earning between Rs 5-10 lakh per annum “also have exhibited a dip of nearly 3%.”
The highest income group – those earning more than Rs 10 lakh – notes Business Standard, display the maximum decline in sentiment, they “are the furthest apart, in terms of where they were in 2019.”
If we look at the annual numbers, consumer sentiment, in terms of household income levels, declined after the COVID-19 pandemic. While it has shown signs of recovery, the sentiment is still below pre-pandemic levels.
RBI consumer confidence surveys had indicated inflation as concern
As reported in The Wire in February, RBI’s consumer confidence surveys are indicating anxiety among households over inflation which could be a key reason for consumer confidence dipping. Data, released on February 8, noted that “majority of survey participants expect a rise in price and inflationary pressures especially for food product category for the three months horizon”. They say that “median inflation expectation for the three months ahead increased by 10 bps and stood at 9.2%.”
RBI’s Michael Debabrata Patra had said in December 2023 that “inflation remains highly vulnerable to food price spikes, as the spurt in momentum in daily data on key food items for the month of November and early December reveal”. He emphasised that “households are already wary: although they expect inflation to remain unchanged three months ahead, they are more unsure about this prognosis than they were two months ago. Over the year ahead, however, they are more sure than in the past that inflation will likely rise.”
Patra added, that “consumers too reveal more pessimism about inflation a year ahead than when they were surveyed in September”.
RBI regularly conducts Consumer Confidence Surveys. The March 2024 round of the survey was launched on February 29. As per RBI, the survey “seeks qualitative responses from households, regarding their sentiments on general economic situation, employment scenario, price level, households’ income and spending. The survey is conducted regularly in 19 cities, viz., Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kolkata, Lucknow, Mumbai, Nagpur, Patna, Raipur, Ranchi and Thiruvananthapuram.”
Concerns over job losses and declining employment opportunities, as most recently flagged by the ILO report on youth unemployment, signal that it too may be a key concern for household sentiment. Chief Economic Advisor to the Modi government, V. Anantha Nageswaran had said in response to the report that it is incorrect to assume that the government can solve all social and economic problems such as unemployment.
