Stark pessimism in sentiment: RBI survey

The results of the Reserve Bank of India’s surveys, conducted before the nation went into lockdown and released on Friday, show the general population remained pessimistic about economic and job prospects in the immediate future. Yet, they expected some improvement in the next year, showed the consumer confidence survey.

The Reserve Bank of India (RBI) on Friday released the results of a couple of its surveys, conducted before the nation went into lockdown. These show that the general population remains pessimistic about economic and job prospects in the immediate future, even as they expect some improvement in the next year, going by the consumer confidence survey.

However, a separate ‘industrial outlook survey ’ was repeated a fortnight after the original survey, to capture a possible impact of coronavirus disease (Covid-19). The survey, repeated with 48 companies as against 860 in the original, showed “very sharp deterioration in sentiment across all sectors for Q4FY20, and stark pessimism for Q1FY21, compared to the assessment in the initial round of the survey,” the RBI said.

In that survey, conducted from March 18-20, the central bank had found companies to have assessed a deterioration in demand conditions for the manufacturing sector, which also translated into pessimism about the overall business situation for Q4FY20.

Other than the industrial outlook survey, other surveys were not able to capture the economic impact caused by the coronavirus scare, considering that the crucial surveys had ended by March 7. Till March 13, the government didn’t see the epidemic as a health emergency, but went on a lockdown the following week.

The March round of the Consumer Confidence Survey, conducted between February 27 and March 7 across 13 major cities, indicated that confidence “remained broadly close to the all-time low, which was recorded in the previous survey round”.

Expectations for the year ahead, as gauged by the future expectations index, were largely unchanged from the last round.

However, “sentiment on the general economic situation, employment scenario, and household income remained pessimistic”. There was some improvement in expectation for the year ahead. While households perceived some easing in inflation pressure, sentiment on discretionary spending remained in the contraction zone.

The consumer confidence survey was conducted on 5,365 households in Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna, and Thiruvananthapuram.

Similarly, in the Inflation Expectations Survey of Households — conducted in 18 major cities among 5,912 urban households — the three-month and one-year median inflation expectations declined by 10 bps and 20 bps, respectively. However, the share of households expecting general inflation to rise in the next three months and one year also declined noticeably, compared to the January 2020 round, the RBI said.

In the Order Books, Inventories and Capacity Utilisation Survey (OBICUS) survey for the December quarter 2019 — covering 704 manufacturing companies — the RBI found that capacity utilisation declined to 68.6 per cent in the Q3FY20, from 69.1 per cent in the previous quarter.