Consumer sentiment is improving but still at low levels

- People's economic condition and perception about the future has not improved after recovering from the shock of Corona

In January 2023, consumer sentiment improved and the Consumer Sentiment Index stood at 83.9. This is the highest level the index has ever seen after sliding during the Covid pandemic. However, this index is still at a lower level than the pre-Covid pandemic level. In February 2020, the index was at the level of 105.3. In March 2020, it fell to 8 percent and then in April it registered a sharp decline of 53 percent. The index fell sharply when the Covid pandemic broke out and later saw a sharper decline when the lockdown was imposed.

Consumer sentiment has been the slowest to improve among all indicators of the state of the economy. While most indicators have recovered quickly from the shock of the Covid pandemic, the economic condition of the country's households and their perception of the future has not fully improved. The pace of reform is very slow and still incomplete. The pace of recovery has been slow but seems complete, according to the Reserve Bank of India's consumer confidence survey.

CMI's Consumer Pyramid Household Survey shows that the consumer sentiment index is down 20 percent compared to February 2020. After this, in March, the Covid pandemic started to spread and the process of restriction started all around. The difference is much greater in urban areas than in rural areas.

While calculating this index, people were asked five questions. Before the Covid pandemic, about 31 percent of households said their financial situation had improved compared to a year ago, and 8 percent said their situation had worsened. Thus, 22 percent of households said that their financial condition has improved compared to a year ago.

In January 2023, 31 percent of households said their situation had improved, but 23 percent said their situation had worsened. As a result, the number of households who reported that their economic situation had worsened was on net 2 percentage points higher than the number of households who reported that their situation had improved. Although this is a major improvement so far since the outbreak of the Covid pandemic, there are still negatives.

27 percent of households were optimistic about improving their financial situation in the year before the pandemic. In January 2023, on a net basis, 6 percent of households felt disillusioned about their likely financial position a year later. Less than 18 percent of households feel that their financial situation will improve after one year, and about 24 percent of households expect their financial situation to worsen in the next one year. This figure is a big improvement from the worst situation during the Covid pandemic but a full recovery in expectations about the future is still far away.

There seemed to be an increasing number of people who believed that the present time was better. Such a perception bodes well for industry and was a sign of increased prosperity among Indian households and their participation in economic activity. But after the Covid pandemic, the attitude changed and there was an increase in the number of households who felt that the current time was not conducive to buying consumer goods.

But this trend quickly changed. Even today there are a large number of households who think that the current time is not good for buying consumer goods. However, the proportion of such families is decreasing. Negativity about discretionary spending is waning. This negativity is at its lowest level since April 2020.

Two questions in the Consumer Sentiment Index relate to the economic and business environment. On a net basis, more households are pessimistic about the future economic and business environment. In this sense, all five indicators are negative. The consumer index is improving rapidly. But there is still a long way to reach the pre-Covid situation.....