NOVEMBER BROUGHT IN GOOD TIDINGS
The index of current economic conditions, which essentially measures the assessment of households regarding their economic well-being, compared to a year ago, increased by 2.8 per cent during November. The index tells us that a greater proportion of people in November believed that their current economic conditions are better than they were a year ago. Therefore, this is a measure of the degree of general optimism amongst households and not a measure of an increase in the money value of well-being as is understood by, say, income.
Households also believed, more strongly than earlier, that their economic conditions would improve in the future. The index of consumer expectations increased by 3.5 per cent. Again, this is about the proportion of households that believe that the future looks promising compared to those who see the future differently.
Sentiments improved in both, urban and rural areas. The index of consumer sentiments for urban areas increased by 2.3 per cent and, the index for rural areas increased by a much higher 3.6 per cent. Rural folks are more optimistic than urbanites. However, during November both gained more confidence in the future than in their assessment of their current economic conditions.
The positive consumer sentiments of November were matched with a stop to the rising trend in unemployment rates. The unemployment rate had been rising steadily since its low-point of 3.4 per cent in July 2017. Since then, it rose to 4.1 per cent in August, 4.5 per cent in September and 5.7 per cent in October. This rising progression was halted in November, which recorded a lower unemployment rate of 4.6 per cent.
The trend in unemployment was the same in rural and urban areas. The rate had risen in every month since July 2017 but, this progression was halted in November 2017.
The November unemployment rate was modest at 5.3 per cent in urban India and at 4.2 per cent in rural India. Recent weekly estimates show that the unemployment rate is declining in rural India and is broadly stable in urban India. As a result, overall unemployment rate is declining mildly. Both, its level and its trend are in the comfort zone.
However, labour participation continues to remain weak. At around 43-44 per cent, it is much lower than the 47 per cent levels in the first half of 2016. Urban labour participation rate has fallen from 45 per cent to 41 per cent. Consumer sentiments are still lower than their base levels of September-December 2015. While consumer sentiment improved remarkably in November, it did decline during the weeks of November 26 and December 3.
It is important to build upon the positive developments of November. Sentiments and expectations about the future play an important role in consumer spending. And, enthusiastic consumer spending is the best solution for reviving growth—or accelerating the turnaround seen in the second quarter GDP growth.