The Reserve Bank of India (RBI) recently released the results of forward-looking surveys. Based on the feedback received from the respondents the survey results provide important insights with respect to consumer confidence, inflationary expectations and economic growth expectations.
Consumer confidence
The survey collects current perceptions (vis-à-vis a year ago) and one year ahead expectations of households on general economic situation, employment scenario, overall price situation, own income and spending across 19 major cities.
As per the survey results, Consumer confidence for the current period paused on its uptrend as sentiments on all parameters, except spending. The current situation index (CSI)2 moderated to 97.1 in May 2024 from 98.5 two months ago. (A value below indicates a state of pessimism)
However, for the year ahead, consumer confidence remained at elevated level in the optimistic terrain though it declined, albeit marginally, due to relatively tempered sentiments on the general economic situation and employment prospects. The future expectations index (FEI) stood at 124.8 in May 2024 (125.2 in the previous survey round).
Consumers expect higher rise in overall spending over the next one year vis-à-vis the previous survey round; more respondents expect an increase in both essential and non-essential (discretionary) spending.
Household inflationary expectations
Households’ inflation expectations for the three months and one year ahead periods increased by 20 basis points (bps) and 10 bps, respectively, but remained in single digits; their perception on current inflation, however, moderated by 10 bps and stood at 8.0 per cent in the latest survey round.
Higher share of respondents expected prices and inflation to rise for all major product groups over the next three months as well as one-year periods
At the aggregate level, female respondents had marginally lower inflation assessment and expectations than their male counterparts. Among occupation categories, self-employed respondents group expected highest inflation.
For one year horizon, households’ expectations on general prices remained closely aligned with their assessment related to food prices and housing.
Forecast on macroeconomic indicators
GDP: Real gross domestic product (GDP) is expected to grow by 6.8 per cent in 2024-25, revised up by 10 basis points (bps) from the previous round. It is expected to grow by 6.7 per cent in 2025-26, revised up by 20 bps from March 2024 survey round.
Forecasters have assigned highest probability to real GDP growth in the range 6.5-6.9 per cent for both the years 2024-25 and 2025-26.
Annual growth in real private final consumption expenditure (PFCE) and real gross fixed capital formation (GFCF) for 2024-25 are expected at 6.0 per cent and 8.6 per cent, respectively. Real gross value added (GVA) growth projection has been revised up marginally to 6.6 per cent for 2024-25 and kept unchanged at 6.4 per cent for 2025-26.
Inflation: Annual headline inflation, based on consumer price index (CPI), is expected at 4.5 per cent for both the years 2024-25 and 2025-26.
External sector: Merchandise exports and imports are projected to grow by 3.9 per cent and 5.2 per cent, respectively, during 2024-25 and by 5.1 per cent and 6.0 per cent, respectively, during 2025-26, in US dollar terms. Current account deficit (CAD) is expected at 1.0 per cent (of GDP at current market prices) during 2024-25 and at 1.1 per cent during 2025-26.
