The slowdown in the Indian economy has taken a toll on consumer confidence, which plunged to a six-year low in September. Indians are now less upbeat about employment, the current and future economic situation and are spending less.
According to the Reserve Bank of India’s Consumer Sentiment Survey, both the current situation index and the future expectations index recorded declines in Asia’s third-largest economy.
The current situation index fell to 89.4 in September from 95.7 in July. It was the lowest since September 2013, when it touched 88.
A majority of respondents, or 52.5%, felt the employment situation had worsened. This was the lowest since the index started in September 2012. As for the future, 33.4% felt the employment situation would only get worse in the coming year.
Also Read: India’s unemployment problem acute
Almost half, or 47.9%, of the households surveyed felt the overall economic situation had worsened. However, this was lower than December 2013, when 54% of respondents said the economic situation was bad.
Of those polled, 31.8% felt the economic situation would only worsen further in the coming year. In September 2013, 38.6% had expressed this view.
While sentiment for overall spending, primarily on essentials, remained strong, sentiment for discretionary spending, including buying consumer durables, travel and eating out, weakened in the September round of the survey, it said.
Respondents were a little upbeat on their own circumstances and future income. Among those surveyed, only 26.7% said their own income had decreased. As for the coming year, 53% see an increase in income and only 9.6% feel it will go down.
The survey by the RBI was conducted across 5,192 households in 13 major cities – Delhi, Mumbai, Kolkata, Chennai, Bengaluru and Hyderabad. Seven other state capitals of Bhopal, Guwahati, Jaipur, Lucknow, Patna and Thiruvananthapuram were also part of the survey.
These households were asked about general perceptions and expectations on the economic situation, employment scenario, price situation, personal income and spending.
The Reserve Bank has reduced its repo rate at which it lends money to commercial banks for the fifth time in a row. On Friday it had cut 25 basis points and this takes the benchmark lending rate to 5.15%, the lowest in a decade.
The central bank had also cut its economic growth forecast for 2019-20 to 6.1%, a drastic cut of 80 basis points from the projection it made in the August policy meeting. This could be the country’s lowest annual growth since 2012-23.
In the June quarter (second quarter), India’s gross domestic product grew by only 5%, the slowest pace since 2013. So to even achieve this lowered target, the economy will need to grow at 7% in the second half of the financial year.
Since February, the central bank has cut its growth forecast by 130 basis points from 7.4% to 6.1%.
The Narendra Modi government had also taken a number of fiscal steps to spur growth, including a surprise reduction in corporate taxes. In fact, after Finance Minister Nirmala Sitharaman presented her maiden budget in July, a number of proposals put forth have been rolled back or tweaked in the following months as bad news on the economic front kept coming in.