Why consumer confidence is increasing in India & how this optimism can continue | So Good News
CPublic confidence appears to be recovering in recent weeks after a long period of growth since the start of the Covid-19 pandemic. The Reserve Bank of India’s and the Center for Monitoring Indian Economy’s (CMIE’s) customer sentiments showed a significant improvement in July. A positive outlook on employment, household income and spending led to an increase in consumer confidence. Good ideas should continue.
Indicators of consumer demand such as retail sales, auto sales, credit card balances and consumer loans have seen an improvement after several months of weakness. Initial signs of a slowdown in inflation, the opening of mass communications services, the start of the festive season and good agricultural prospects should boost consumer confidence. In order to maintain consumer confidence, consumers need to be confident about their jobs, income and inflation outlook.
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Recovery in the mind of consumers
CMIE’s Consumer sentiments index and Reserve Bank of India’s Consumer confidence index of CMIE, showed improvement in July. All of this examines the current situation and future prospects.
CMIE images consumer sentiment index it rose from 68.44 in June to 73.05 in July, registering a growth of 6.7 percent over the previous month. This was a sharp improvement from the 1 percent growth in June. Rural consumer sentiment registered a strong growth of over 7 percent in July. Improved prospects for the agricultural sector due to the encouraging progress of the monsoon in the southwest in July seem to have led to a significant change in the sentiment of rural consumers.
Rural consumer sentiment also grew by 4.8 percent in July. Consumer sentiment showed an overall improvement all categories of workFarmers and daily workers show a significant change in consumer sentiment compared to salaried workers and businesses.
The Reserve Bank of India’s bi-monthly survey shows a recovery, albeit slightly in July. This study shows assessment current attitudes and expectations one year into the future on the general economy, employment conditions, price conditions and family spending. Households have reported an increase in their current spending and expect this to continue.
The survey shows that consumers are optimistic about the state of the economy and how they will spend money in the next one year, although their views on services, prices, and growth of income are lower than in previous surveys.
RBI HHousehold Inflation Expectations Survey it reflects the decline in household inflation. If the early signs of inflation stabilize, consumer confidence will see a significant improvement. For example, due to the recent slowdown in inflation in the US, the University of Michigan’s Consumer sentiment index has changed. Early August readings were up to 55.1 from 51.5 in July
The demand of consumers to show signs of carrying
Consumer demand, a key source of economic growth, fell to 1.8 percent in the January-March quarter from 7.4 percent in the October-December quarter. Although private consumption in 2021-22 surpassed pre-Covid (2019-2020) levels, the recovery has been sluggish. Economic uncertainty, rising prices affected consumer sentiment and demand.
However, since the end of the third wave, the revival of highly interactive services and the reduction of product bottlenecks, some signs of consumer demand are showing a resurgence. Last week’s sales winner sales seen in the same week in the pre-Covid era. Passenger cars witnessed business history in the month of July, mainly because of the decrease in food supply problems. Car registrations, the number of daily flights, the number of passengers, business and leisure travel have all increased in recent weeks.
Signs of rural demand have been around for a long time, but greener shoots are emerging in recent months. While the two-wheeler industry saw a record selection in July, tractor sales still need to be picked up. The increase in the price of crops, the improvement of economic activities that lead to the migration of workers to the cities will reduce the economic problems of the rural areas.
Early signs of easing stress in the rural labor market
Demand for jobs under the government’s Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) rose during the pandemic. The system served as an important source of employment for workers who returned to the countryside during the lockdown. The increase in the demand for jobs under MNREGS shows the stress on the rural economy as jobs are being demanded under the scheme without other jobs. Demand fell after the peak of the epidemic, although it was still above the pre-epidemic level.
In July, the job demanded under MNREGS he fell almost half compared to the previous month. The introduction of agricultural and non-agricultural activities and the return of urban workers resulted in fewer people seeking employment under the MNREGS. Pushing policies towards public services in rural areas should also reduce the pressure on the rural market.
Overall, mixed signals are emerging on the job front. According to comparison and CMIE, the rise in agricultural activity and a better monsoon led to a 6-month deficit in July. The drop in unemployment is due to the economic growth in the rural areas. Rural areas, in contrast, saw an increase in the unemployment rate in July.
Taking out a commercial loan
Consumer spending is also reflected in the growth of the personal loan sector. Personal loans grew by 18 percent in June. Home loans, which account for more than half of personal loans, registered a growth of over 15% in June. This can boost real estate sales.
Fixed income loans have also seen a significant improvement, reflecting an increase in discretionary spending. More recent information showed a 77 percent increase in consumer credit. This is different from the time of the plague loan against gold jewellery saw a significant increase.
Radhika Pandey is a consultant at the National Institute of Public Finance and Policy.
Views are personal.
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