Advertisement

Home / Business / Confidence index hits a low

Confidence index hits a low

RBI survey shows stark reality of the current stress in the economy
The RBI said that consumer confidence collapsed in May with the current situation index (CSI) touching a historic low and the one-year ahead future expectations index (FEI) also recording a sharp fall, entering the zone of pessimism.

Our Special Correspondent   |   Mumbai   |   Published 04.06.20, 09:49 PM

A survey by the Reserve Bank of India (RBI) has shown another stark reality of the current stress in the economy with consumer confidence crashing in May and people being pessimistic for the next one year.

The results of the “Consumer Confidence Survey” also come after the relief package by the central government failed to live up to expectations and the Centre refrained from putting more money into the hands of people to give demand a boost.

The survey was conducted in 13 major cities where perceptions and expectations on variables such as the general economic situation, the employment scenario, the overall price situation and own income and spending were obtained from 5,300 households.

The RBI said that consumer confidence collapsed in May with the current situation index (CSI) touching a historic low and the one-year ahead future expectations index (FEI) also recording a sharp fall, entering the zone of pessimism.

The CSI and FEI are compiled on the basis of net responses on the economic situation, income, spending, employment and the price level for the current period and a year ahead, respectively.

While the CSI fell to 63.7 from 85.6 in March this year, the one-year ahead expectations also dropped to 97.9 from 115.2 in March. An index reading above 100 denotes optimism while that below 100 shows pessimism.

The RBI pointed out that the perception on the general economic situation, employment scenario and household income plunged deeper into contraction zone, while expectations on the general economic situation and employment scenario for the year ahead were pessimistic.

However, the overall consumer spending remained afloat, largely due to the relative inelasticity in essential spending. Yet consumers reported sharp cuts in discretionary spending while not expecting much improvement in the coming year, the central bank added.

The results of the survey come after latest data showed economic growth for the January-March quarter at 3.1 per cent. Economists are projecting that the domestic economy will contract this year with some estimates saying that the GDP will contract 5 per cent in this fiscal.

1.5% contraction

The RBI also released a survey of professional forecasters (SPF). The round, which saw the participation of 24 panelists, said that India’s real GDP is likely to contract 1.5 per cent in 2020-21 but is expected to revert to the growth terrain next year, when it is likely to grow 7.2 per cent.

It further said that real private final consumption expenditure (PFCE) is expected to decline 0.5 per cent during the current fiscal but is likely to record a 6.9 per cent growth in the next year.

On inflation, the headline consumer price index (CPI) inflation is expected at 5.6 per cent in the first quarter of this fiscal, but is seen to moderate thereafter to 2.8 per cent by the fourth quarter.

As regards the external sector, it said that growth in merchandise exports and imports are expected to decline by 13.5 per cent and 17.7 per cent, respectively, during 2020-21 and expected to improve in the following fiscal. The current account deficit is expected at 0.5 per cent of GDP in 2020-21.

Advertisement


Advertisement
Advertisement
Advertisement
 
 
 
Copyright © 2020 The Telegraph. All rights reserved.