In apparent pessimism following declining GDP and job uncertainty, a Reserve Bank of India (RBI) Consumer Confidence Survey has found Indian consumers are cutting down on their discretionary spends, and households are worried about jobs and the present economic situation. Not only consumers, but even manufacturers remain anxious about the future.
This is reportedly the steepest fall in nine years. Lending has been tightened and domestic consumption has also decreased, which saw the GDP growth rate slump to a six-year-low.
The RBI survey was conducted in 13 cities across the country — Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram — and in 5,334 households.
The consumer confidence index for the current situation fell to 85.7 in November from 89.4 in September. 100 is seen as the line between pessimism and optimism. A number above 100 indicates positive sentiment, while below 100 indicates the opposite.
As per the RBI survey, people's spending on non-essential items of consumption has shrunk compared to a year ago even as they expect their overall spending to remain unchanged largely due to an increase in prices.
"Based on the Reserve Bank's consumer confidence survey, spending on non-essential items of consumption has shrunk compared to a year ago; however, consumers expect their overall spending to remain unchanged going forward largely due to an increase in prices," the central bank said in its monetary policy statement issued on Thursday.
Manufacturing firms polled in the industrial outlook survey of the RBI expect weak demand conditions and reduced input price pressures in the third and fourth quarter of the current fiscal.
Further, they expect a further weakening of pricing power on muted output prices.
The RBI survey in November found households expecting prices to rise by 120 basis points over the 3-month horizon and 180 basis points over the next year.
The misery of slowdown-hit households doesn’t seem to be ending any time soon as factory output has also been on a downward spiral. The capacity utilisation declined to 68.9% in Q2 of 2019-20 from 73.6% in Q1 in the early results of the RBI's order books, inventories and capacity utilisation survey (OBICUS).
Lower capacity utilisation means fewer fresh investments and hence fewer job opportunities in the market.
With the second-quarter GDP slipping to a six-year low of 4.5% and very few macro indicators signalling a quick recovery, the RBI on Thursday cut GDP growth forecast for the current fiscal to 5%.
With IANS inputs