RBI poll shows short-term pessimism and medium-term optimism of consumers

On the face of it, the latest Reserve Bank of India Consumer Confidence Survey presents a somewhat schizophrenic picture of urban Indians.

Conducted in 13 cities in November and released on December 5, the survey reports worsening job perception by 47% respondents, the highest since November 2017. But 54% people are confident that job prospects will improve in the next 12 months — a period during which India will go through Lok Sabha elections.

Similarly, the percentage of people who feel the economy has improved fell for the third time consecutively in the bi-monthly survey, but the number of respondents saying economic conditions will improve next year reached 53.6%, the highest since December 2017 (see graphs).

What explains the short-term pessimism and medium-term optimism of consumers, especially given the existing political uncertainty? Economists attribute the contrast in perception to current volatility and belief in the economy’s long-term potential.

“What the data says is that people don’t like what is happening now in the economy or the financial markets. They don’t like the upheaval, be it the markets, the economy, or institutions, and that is reflected in the short-term view. But people see the strength and potential of the economy,” said Pronab Sen, former chief statistician of India. “The impact of impending elections is already taken into account,” he added.

Saumya Kanti Ghosh, group chief economic adviser with State Bank of India, said the current apprehensions about jobs and the economy are due to the wobbly rupee value, uncertainty around oil prices and choppy stock markets.

“The short-term pessimism is due to the fact that oil prices were going up for a while, the rupee was falling for some time and generally there was a mood of despondency. For the future, optimism is largely fuelled by growth prospects,” he said.