Consumer sentiment continues to be grim

NEW DELHI: Consumer sentiment will continue to be an impediment to achieving a sustained high growth path for the Indian economy, if the findings of the latest round of RBI’s Consumer Confidence Survey (CCS) are any indication.

The CCS is conducted in 13 major Indian cities and it, therefore, captures the mood in urban areas. The latest round of the CCS was conducted between January 2-11. This means that it coincided with the beginning of the third nationwide wave of Covid-19 infections.

The fact that there was a third wave of the pandemic in India seems to have played an important role in shaping future sentiment. The CCS asks respondents about their perception of the current situation (compared to a year ago) and their expectation about the situation a year from now.

While the Current Situation Index (CSI) in the CCS has improved marginally between the November 2021 and January 2022 round, the future expectations index (FEI) has actually fallen compared to the previous round. The last time the FEI fell was during the March 2021 and May 2021 rounds, which coincided with the beginning and peak of the second wave of Covid-19 infections. It is to be expected that every new wave brings with it the fear that there would be another wave, which gives rise to the perception that a complete normalisation of the economy will be delayed even further.

To be sure, even the CSI continues to be significantly below pre-pandemic levels. The latest reading of the CSI was 63.7. The CSI was at 85.6 in March 2020.

The CSI value is calculated by adding 100 to the average of net responses– the difference between those who report an improvement and worsening – on various metrics tracked in the CCS.

This means that for any value lower than 100, the share of respondents who reported a worsening will be greater than those who reported an improvement.