Consumption Demand Key Driver Of Domestic Economic Growth In Recent Years

Consumption demand has been the key driver of economic growth in India in the recent years. According to an article titled 'The Consumer Rules! Some Recent Survey-based Evidence' in the latest Monthly Bulletin from the Reserve Bank Of India (RBI), survey based information on households' perceptions and expectations about a range of key parameters that could impinge on their consumption decisions - income, employment and inflation - provide early indications about the current state of consumption demand.

Continuous assessment of households' sentiment through regular surveys helps provide useful inputs to policy making. As per the findings of the latest round of survey, the current situation index has moved into positive territory after a prolonged phase of pessimism. The elevated optimism in households' expectations has resulted in the future expectations index reaching an all-time high. Importantly, the optimism largely reflects improvements in sentiments on general economic situation (GES), employment scenario and price level.

Analytical results show that opinions on GES nevertheless vary across occupation categories for both the current and future periods. In general, the unemployed/students portray optimistic sentiments for both the current period and one year ahead. On the contrary, retired/pensioners represent the prominent group expressing pessimism on GES, both assessment and expectations.

Overall, survey results over the past three years indicate that significant decline in inflation has enhanced the real purchasing power of income, boosting consumer confidence. Optimistic sentiment revealed through survey feedback on expectations also indicates that respondents believe the low inflation scenario to continue in the near term. Policy announcements targeting rural agrarian distress in the last 2-3 months and recent easing of monetary policy might have also contributed to these recent improvements.

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