For the first time since the onset of the COVID-19 pandemic, the share of urban consumers who were pessimistic about the Indian economy declined to below 50%, according to the bi-monthly Reserve Bank of India (RBI) survey. When asked to comment on their current perception of the economy, 48.9% said it has worsened, the lowest share since the pandemic outbreak.
By the end of 2019, due to the worsening economic situation, more than half the urban consumers had opined that the economy had worsened compared to the earlier year. Following the pandemic outbreak, the share of pessimistic consumers continued to surge. It peaked in May 2021 with 80% of them saying that the economy had worsened. While the levels of pessimism have rapidly declined since they are still much higher compared to the pre-pandemic levels.
The RBI survey was conducted across 19 major cities between May 2 and 11, covering 6,089 respondents.
Chart 1 | The chart shows the share of people who said that the current economic situation has worsened
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While the levels of pessimism in the economy have sharply reduced in recent months, a similar decline was not observed regarding employment opportunities.
Chart 2 | The chart shows the share of people who said that the current employment situation has worsened compared to the earlier year
While the levels of pessimism about employment did rapidly fall post the pandemic peak in May 2021, the rate of decline has weakened since. In the past six months, the share of consumers’ pessimistic about their employment scenario has stagnated in the 47-49% range.
Chart 3 | The chart shows the share of urban consumers who said that their income levels have declined compared to the year earlier
The share of people who are pessimistic about their income levels continued to decline rapidly, approaching the pre-pandemic levels. In May 2023, only 26.3% of urban consumers felt that their income levels had declined, a considerable fall from 32.9% in November 2022.
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Therefore, while the economy seems to be improving, it has not reflected much on the employment front, whereas the income levels of those who already got jobs seem to be stabilising or even rising considerably.
Chart 4 | The chart shows the share of urban consumers who said that price levels have increased compared to the year earlier
Worryingly, over 90% of the respondents continued to say that price levels of commodities have increased compared to the earlier year. In May 2023, 92.2% of urban consumers said that the price levels increased, as shown in Chart 4.
The share of those who said price levels increased has remained above the 90% mark since the second wave of the pandemic in 2021.
Overall, the current situation index (CSI) of the RBI’s survey, which captures the confidence levels among urban consumers currently, continues to improve, while the pace of ascent has slowed down.
Chart 5 |The chart shows the current situation index (CSI) and future expectation index (FEI)
As shown in Chart 5, the CSI improved by 1.5 points, from 87 in March to 88.5 in May, similar to the pre-pandemic levels. However, it is to be noted that confidence levels were poor even before the pandemic due to the economic slowdown in 2019. So, when compared to the end of 2018, which precedes the economic downturn, the confidence levels in May 2023 continue to remain relatively low.
The future expectation index (FEI), which captures the confidence levels among urban consumers about their future, mimics a similar trend. The FEI improved marginally from 115.5 in March to 116.3 in May, again relatively lower than the levels seen at the end of 2018.
Source: May 2023 round of Reserve Bank of India’s consumer confidence survey
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