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Consumer confidence and industry sentiment shows pessimism : RBI Survey

Consumer confidence as measured by the current situation index was 85.6 in March 2020, which is close to the all-time low of 83.7 recorded in January 2020. An index value below 100 represents pessimism while a figure above 100 signifies consumer optimism.

The Consumer Confidence Survey (CCS) was part of a few other forward looking surveys released by the Reserve Bank of India (RBI) on Friday. 

The RBI survey was conducted between February 27 – March 7 is a major cause of concern since the consumer confidence seems to have dipped even before the major spread of the coronavirus in India and the nation-wide lockdown which was imposed on March 24.

Although consumer sentiment on the general economic situation, employment scenario and household income remained in the negative territory, they have shown some signs of improvement from the previous survey conducted in January 2020. Households perceived some easing in the inflation pressure however, sentiments on discretionary spending contracted from the previous survey. 

However, year ahead expectations remained positive on the general economic situation, employment, income levels as well as spending. 

While the expectation on spending on essential items fell from 81.1 per cent in March 2019 to 79.2 in March 2020, spending expectations on non-essential items fell from 29.8 to 8.3 per cent during the same period. 

The survey was obtained from 5,365 households across 13 major cities including Ahmedabad, Bengaluru, Bhopal, Chennai and Delhi. 

Industrial Outlook survey 

Indian manufacturing companies, which assessed some improvement in production and order books in Q4 FY2019-20 from the weak sentiments exhibited in the previous quarter, expect improvement in demand conditions in Q1 FY 2020-21. The survey was conducted between January-March 2020 with the participation of 860 companies.

RBI conducted a repeat survey between March 18-20 to measure the sudden adverse impact of the coronavirus outbreak on industrial activities. The repeat survey, which saw the participation of 48 out of the 860 companies, showed that manufacturers expect demand conditions to deteriorate resulting into pessimism on the overall business situation. According to the quick survey, the outlook for Q1 FY2020-21 indicated a negative sentiment. 

“A comparison of results for the common respondents both for round 89 of IOS (Industrial Outlook Survey) as well as the quick survey reflected (a) very sharp deterioration in sentiments across all sectors for Q4:2019-20; and (b) stark pessimism for Q1:2020-21, when compared to their assessment given in the regular round of the survey,” RBI’s survey note stated. 

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