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Consumers in India turn most pessimistic in more than five years

The drop coincides with a deepening slowdown in the economy and rising worries about employment.

Bloomberg|
Updated: Dec 06, 2019, 11.24 AM IST
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The yearlong crisis in the shadow-banking sector has tightened lending, affecting domestic consumption that makes up about 60% of the nation’s economy.
By Anirban Nag

Consumer confidence in India dropped to its lowest since at least 2014, the year Prime Minister Narendra Modi came to power.

The current situation index fell to 85.7 in November from 89.4 in September, according to the Reserve Bank of India’s consumer confidence survey, where 100 is the dividing line between pessimism and optimism. The future expectations gauge -- that takes into account the one-year ahead perceptions -- fell to 114.5 from 118.0.

The drop coincides with a deepening slowdown in Asia’s third-largest economy and increased worries about employment. The yearlong crisis in the shadow-banking sector has tightened lending, affecting domestic consumption that makes up about 60% of the nation’s economy. All this contributed to growth cooling to a new six-year low in the quarter ended September.

The central bank’s survey was conducted in 13 big cities and 5,334 households. Consumers were surveyed about perceptions and expectations on the general economic situation, the jobs scenario, the overall price situation apart from income and spending.

gloomy

Worryingly enough, respondents felt that prices have increased in the past year and are likely to rise in the year ahead, implying inflationary pressures are likely to stay sticky in the near term.

On Thursday, India’s central bank shrugged off lower growth worries to keep interest rates unchanged amid a spike in headline inflation. The six-member Monetary Policy Committee headed by Governor Shaktikanta Das decided to wait and see how the five rate cuts already delivered this year pan out before it does more.

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