Households in India expect inflation to moderate, find RBI surveys

By Anup Roy

Indian households expect that inflation will moderate and the employment situation will improve in the coming months, according to surveys from the central bank.
 

Inflation expectations over the next three and 12 months declined by 30 basis points each in its March round of surveys, from the January round, the Reserve Bank of India said. 

The surveys probably helped the RBI leaving its benchmark interest rate unchanged on Thursday after six increases since last May, but Governor Shaktikanta Das said “this is a pause, not a pivot” as the central bank’s focus remains on fighting inflation. It sees headline consumer inflation at 5.2% in the year that started in April, against a previous outlook of 5.3%. 

A separate consumer confidence survey found the current situation index got better “on account of improved perceptions on general economic situation, employment and household income,” though overall it still remained in the pessimistic zone.

“Households’ overall outlook for the year ahead remained in positive terrain despite marginally lower optimism,” the central bank said, as sentiments on employment improved nearer to levels seen in mid-2019, before the pandemic struck. “Consumers are also optimistic about the employment outlook as more than half of the respondents expect employment scenario to improve over the next one year.” 

Household spending remained buoyant, with more than a third of the households expecting a rise in non-essential outlay over the next year.

Another set of surveys found capacity utilization for the manufacturing sector improved to 74.3% in the October-December quarter from 74% in the previous three-month period. New orders received by manufacturers remained flat from the previous quarter, but rose from the year-ago period. However, the pace of annual growth in new orders moderated for the second consecutive quarter, the RBI said.