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Consumer confidence plunges in May in India

Christian Fernsby ▼ | June 5, 2020
Consumer confidence collapsed to record low in the month of May amid uncertainty due to coronavirus outbreak, while expectation on general economic situation and employment scenario turned pessimistic for the year ahead, indicating a bumpy road ahead for the Indian economy.
Reserve Bank of India
Expectation   Reserve Bank of India
Consumer confidence plunged in May, with the Current Situation Index (CSI) hitting historic low and the one year ahead Future Expectations Index (FEI) also recording a sharp fall, entering the zone of pessimism, as per the Consumer Confidence Survey (CCS) released by the Reserve Bank of India on Thursday.

Topics: India

Consumer perception on the general economic situation, employment scenario and household income plunged deeper into contraction zone, while expectations on general economic situation and employment scenario for the year ahead were also pessimistic, the survey report showed.

"Overall consumer spending remained afloat, mostly due to relative inelasticity in essential spending; consumers, however, reported sharp cuts in discretionary spending and also do not expect much improvement in the coming year," the report noted.

Another RBI survey predicted that gross domestic product (GDP) during the current financial year is likely to contract by 1.5 per cent, though the next fiscal is expected to be much better.

"Real gross domestic product (GDP) is likely to contract by 1.5 per cent in 2020-21 but is expected to revert to growth terrain next year, when it is likely to grow by 7.2 per cent," said the Survey of Professional Forecasters (SPF) sponsored by the RBI.

Real private final consumption expenditure (PFCE) is expected to decline by 0.5 per cent during 2020-21 but likely to record 6.9 per cent growth next fiscal, the survey said.

The real gross fixed capital formation (GFCF) is likely to register negative growth of 6.4 per cent in 2020-21 but is expected to grow by 5.6 per cent in 2021-22.

Real gross value added (GVA) is expected to decline by 1.7 per cent this fiscal but record 6.8 per cent growth in 2021-22, supported by uptick in industrial and services sector activities, said the SPF survey based on response of 24 panellists.

Meanwhile, RBI survey on households' inflation expectations showed that households' median inflation perception and expectations increased sharply in May 2020 as compared with the March 2020 round of the survey.

Participants were expecting increasing price pressure on food products. More households expect general prices and inflation to rise over a three-month horizon as compared to the previous round.


 

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