Consumers pessimistic about further fall in interest rates

MUMBAI: Despite inflation hovering in negative territory, Indian consumers feel that banks are unlikely to slash lending rates over the next one year, according to a survey.

As inflation has declined somewhat over the last two quarters providing greater room for interest rate cuts, the emphasis of policy-makers has gradually shifted from combating inflation to propelling economic growth.

"Acknowledging the role that lower interest rates can play in economic recovery, the Reserve Bank of India (RBI) believes that there is room for banks to reduce their lending rates further and expand their credit," Boston Analytics said in its monthly Consumer Confidence Survey.

"While consumers feel as though interest rates have definitely come down, they have expressed pessimism that they will continue to fall further over the next 12 months," it said.

The combination of declining optimism about future interest rates, job insecurity, uncertainty about borrowing, and pessimism about the state of the economy has lead to weaker purchase sentiment, it said.

"Overall the last few months, there has been a drop in respondents reporting likeliness of committing to big ticket purchases in sectors like durables or white goods, automobiles and home purchase," Boston Analytics said.