RBI: Households expect inflation to cross 10%; consumer confidence moves up
Inflation expectations of households across various cities for three months and one year ahead have crossed the 10-per cent level, showed a survey by the Reserve Bank of India (RBI).
However, consumer confidence for the current period continued on its recovery path, witnessed since mid-2021, though the assessment compared to a year ago remained in negative zone, another RBI survey said.
“Households’ median inflation perceptions for the current period remained unchanged at 9.7 per cent in the latest survey round, while the expectations for both three months and one year ahead rose by 10 basis points each to 10.7 per cent and 10.8 per cent, respectively, as compared to January 2022 round,” the central bank’s Inflation Expectations Survey of Households said.
The inflation survey was conducted during March 2-11, 2022 in 19 major cities and the results are based on responses from 6,033 urban households, the survey further said.
On Friday, while unveiling the bi-monthly monetary policy, the Reserve Bank said it has hiked its inflation forecast from 4.5 per cent projected earlier to 5.7 per cent — below the upper band of 6 per cent of the RBI’s target — in 2022-23 and slashed the growth rate from 7.8 per cent to 7.2 per cent.
According to the RBI survey, for a majority of population and age groups, uncertainty in inflation expectations increased for both three months and one year horizons, as compared to the previous survey round.
Three months ahead expectations for overall prices and inflation were generally aligned to those for food and non-food products, while one year ahead expectations were more aligned to those for non-food products and services, the RBI survey said.
According to the central bank’s Consumer Confidence Survey (CCS), consumer confidence for the current period continued on its recovery path.
The current situation index (CSI) improved further in March 2022, on the back of improved sentiments on general economic situation, employment and household income, from 64.4 to 71.7, the survey said.
One year ahead outlook, as measured by the future expectations index (FEI), also continued on its recovery path which was interrupted by a dip in the January 2022 round at the peak of Omicron variant impact of Covid-19. The future index also rose from 103.3 from 115.2, the RBI survey said.
Households’ opinion about current and future spending remained in positive territory and was bolstered by a rise in both essential and discretionary spending, it said. The CCS was conducted among 5,984 households across 19 cities.
Real gross domestic product (GDP) growth projection for 2021-22 has been revised down by 40 basis points (bps) from the last survey round to 8.8 per cent, the RBI’s Survey of Professional Forecasters on Macroeconomic Indicators said. It is expected to grow by 7.5 per cent in 2022-23.
Panellists have placed GDP growth forecasts in the range of 8.4-9.8 per cent for 2021-22 and the range for 2022-23 is wider at 5.4-8.2 per cent. Forecasters have assigned highest probability to real GDP growth lying between 8.5-8.9 per cent in 2021-22. For 2022-23, highest probability has been assigned to two neighbouring ranges: 7.0-7.4 per cent and 7.5-7.9 per cent.