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Black Diwali? Consumer pessimism can throw wet blanket on festival season

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Just as the festival season began, the Reserve Bank of India (RBI) released data that indicates pessimism reigns among consumers and there is less hope for improvement in general economic conditions compared to last year.

The RBI’s results of the September 2017 round of the Consumer Confidence Survey, reflecting households’ perceptions and expectations on the general economic situation, the employment scenario, the overall price situation and their own income and spending, showed the Current Situation Index waned further into the pessimistic zone, indicating deterioration in sentiment on the employment scenario, the price level and income. The same set of parameters caused the Future Expectations Index to slip further in the September 2017 round relative to its reading in the June 2017 round.

With 27 per cent of respondents polling a fall in their current income, this overall sentiment moved into the pessimistic zone in the current round. The outlook on income, though optimistic, dipped further in relation to the June 2017 round.

However, despite gloomy sentiment on income, more than 80 per cent of respondents reported increased spending over the past year which could partly be attributed to higher prices. The outlook on both essential and non-essential spending improved in the recent quarter.

The results of Consumer Confidence Survey are in line with the RBI’s growth forecast which was slashed from 7.3 per cent to 6.7 per cent for fiscal 2017-18.

The survey says that for 40.7 per cent of respondents the economic situation has worsened in September 2017 as against 25.3 per cent in the same period last year. For one-year-ahead expectation, 50.8 per cent said the economy would improve down from 57.7 per cent in same period last year. However, there was slight improvement in the sentiment over June 2017 round when 48.6 per cent said the economy would improve.

More respondents thought economy had worsened. 40.7 per cent said the economy had worsened while 25.3 per cent said this in the same period last year. There is slight improvement over the June round when 32.4 per cent said economy had improved. In the September round, 34.6 per cent said the economy had improved.

As many as 85.8 per cent respondents said spending would increase, up from 79.1 per cent in the same period last year. 83.2 per cent said spending had increased, up from 70.3 per cent last year. But the RBI says this could be due to higher prices and not improved sentiment.

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