Consumer confidence tumbles, future expectation index climbs: RBI3 min read . Updated: 09 Oct 2020, 08:18 PM IST
India’s consumers have been battered by the double impact of the covid-led lockdown and the economic fallout of the pandemic that has rendered millions jobless
New Delhi: India’s consumer confidence dipped further in September recording its third successive all-time low as household perception of economy and employment prospects worsened, the Reserve Bank of India (RBI) said in its consumer confidence survey released on Friday.
“The current situation index recorded its third successive all-time low, as the respondents perceived further worsening in general economic situation and employment scenario during the last one year," the RBI survey said. More respondents reported curtailment in both overall and essential spending during the past one year, when compared with the last survey round, it reported.
The current situation index (CSI) dropped to 49.9 in September, from the last reported 53.8 in July. RBI’s survey was conducted among 5,364 households across 13 major cities including Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati and Hyderabad via telephonic interviews. In May, the CSI was 63.7.
India’s consumers have been battered by the double impact of the covid-led lockdown and the economic fallout of the pandemic that has rendered millions jobless, and compounded their woes about future financial certainty.
Companies said the impact of a slowdown is more visible than before.
“So far, branded and affordable food products category has not been impacted. But sales of big-ticket items like refrigerators and washing machines that saw an increase immediately after the lockdown was eased can be attributed to pent up demand. That is subsiding now. There is a clear impact of a slowdown on the economy. Big purchases will definitely be affected this Diwali," said R.S. Sodhi, managing director, Gujarat Co-operative Milk Marketing Federation (GCMMF), the maker of the Amul brand of milk and dairy products.
A combination of job losses and an expected contraction in the economy will weigh on consumers for some time.
Although New Delhi-based corporate lawyer Param Sanghvi and his partner have not seen a salary cut, they know no increments are coming and have become cautious about spends. Their electricity bills have shot up due to working from home. They have cut down on all extraneous expenditure like gifts, alcohol and organic food. “We have also deferred laser eye surgery," he said.
On Friday, Reserve Bank of India (RBI) governor Shaktikanta Das said that the Indian economy will contract 9.5% in fiscal 2021. However, growth "may break out of contraction and turn positive during January-March" due to improving signs of recovery, he said.
Consumers, too, remain more optimistic about their future as the RBI’s future expectations index continued to climb up. Households were more confident for the year ahead with the future expectations index (FEI) improved for the second successive survey round. “Consumers expect improvements in general economic situation, employment conditions and income scenario during the coming year," the survey said.
Even as households remain cautious, the recent round of unlocks coupled with the on-going festive season demand could help usher growth for companies and kickstart consumption.
Rajat Wahi, partner, Deloitte India, said there’s expectation of an uptick this festival season among his retail clients even though there’s “cautious optimism" in that uptick. “The reasons for the uptick are around slowly improving economic recovery and optimism around that, opening up of retail (malls, outlets and high streets), fine dining and quick service restaurants, the opening up of cinemas later this month, all of which will help revive these sectors. Besides, people will be looking forward to celebration of festivals, even if virtually, as there has been so little to celebrate for the last 6 months. There’s increased savings in households because of no travel, socialising or other expenses that impact savings," Wahi said.
The country’s unlock five guidelines released earlier this month, that permitted schools and cinemas to open, and festive activities to be held under social distancing norms, along with lifting curbs from all interstate travel and disallowing local lockdowns will also aid mobility in the country.
Companies are also pinning hopes on the ongoing festive season that could drive demand. “Our understanding is that slowly markets are recovering, but not to the full extent. It won’t be 110% over last year, but the fact is from 40% of pre-covid levels, business is now at a visible 60-65%," Kumar Rajagopalan, CEO, Retailers Association of India (RAI) said. However, the next one to two months remain crucial for the retail industry, he said. Wahi added that reduced incomes due to salary cuts and job losses continue to remain a downside.
Lata Jha contributed to this story