The Reserve Bank of India released its bi-monthly Consumer Confidence Survey on December 8, 2022. The survey pertains to the November 2022 period and gathers information about consumers current perceptions and future expectations (current situation vis-a-vis a year ahead) with respect to general economic situation, employment scenario, overall price situation and own income and spending across 19 major cities. The consumer confidence survey entails two indices, current situation index and future expectations index. From the low of September 2020, current situation index has recovered strongly but is still in the negative zone at 83.5 in November 2022. Above 100 value indicates positive consumer sentiment. The future expectations index came in at 114.9, marginally higher compared to 113 in September 2022.
The fast moving and consumer goods (FMCG) sector is one of the best barometers of consumer sentiment and behavior. FMCG volumes contracted 0.5% in Q2FY23 (July-September) as rural volumes declined, impacted by high inflation and cautious spending by households. Urban India FMCG volumes were resilient supported by growth in premium product segments. From a 4% volume fall in Jan-March 2022 period, the FMCG volumes are on a recovery path. So is the current situation index currently at 83.5, recovering from a low of 63.5 in January 2022. In fact, there has been strong improvement in the past 11 months, but the consumers are still concerned about the current economic situation, employment and income. For instance, 64% of respondents in November 2021 felt that the employment scenario worsened, this has improved to 49.6% in November 2022. Similarly in terms of income levels, 32.9% of respondents in November 2022 felt that their incomes have decreased, a stark improvement from 51%, a year ago.
While consumer sentiment is still not in the positive zone, future expectations for the year ahead are strongly optimistic. For instance, the employment scenario is going to improve in 2023 according to 51.5% respondents. In terms of general economic scenario and income levels, 48% and 52.5% respondents respectively are optimistic and confident for the year ahead.
India is expected to remain the fastest growing economy in the world in 2023 similar to last year. Our economy is expected to grow by 7% in 2023. No doubt, consumers are confident and optimistic of their future in terms of employment, income and general economic situation. According to the consumer confidence survey, the outlook on discretionary spending moved to positive terrain for the first time since the onset of the pandemic.
The banking sector is on a strong footing as per the strong quarterly numbers in Q2FY23. Balance sheets are healthy and credit growth is in double digits for all major public and private banks. Bank credit growth is presently around 17-18%. Along with strong retail growth, corporate books are also growing as companies increase their working capital loans and capital expenditure. Strong banking sector will help in enduring economic uncertainty which lies ahead for the Indian economy. Ukraine-Russia conflict continues, China’s recent Covid-19 upsurge, crude price volatility, US Fed’s hawkish stance impacting global currency market and Indian Rupee’s further decline. In spite of these lingering uncertainties, consumer expectations for the year ahead are positive. Hopefully the budget should bolster consumer sentiment further.
