Confidence about economy declines after consistent recovery

Confidence about the economy, job opportunities and income levels marginally declined over the past two months, shows data from the Reserve Bank of India’s (RBI) bi-monthly Consumer Confidence Survey. The decline in confidence came after a consistent and steady increase in optimism in the post-COVID period.

The survey was conducted in May 2024, as the country cast its votes for the Lok Sabha elections, in urban households across 19 cities including, Mumbai, Kolkata, Delhi, and Chennai. It aims to determine current perceptions and expectations on various aspects of the economy. The findings quantify opinions on the general economic climate, employment, price levels, incomes, inflation, and trends in expenditure, compared to the situation from a year-ago.

In May 2021, only 7.5% of respondents in the RBI survey believed that the economy had improved compared to a year-ago. Following this, the share of optimistic respondents consistently increased, with 22.5% of respondents claiming an improvement in May 2022 and 32.1% in May 2023. Confidence about the economy continued to recover in the following months and reached a peak with 41.2% saying it improved in March 2024. However, in the latest round of the survey in May 2024, this share recorded a marginal decline to 40%, halting the recovery. 

Chart 1 | The chart shows the respondents’ opinions on the general economic situation when compared to a year-ago period.

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The share of urban consumers who are confident about their job prospects increased from 8.1% in May 2021, to 27.3% in May 2022, and 32.1% in May 2023. Consumers continued to be optimistic about the job outlook in the following months and reached a peak with 38.1% saying it improved in March 2024. In the latest round in May 2024, this share too showed a marginal decline to 36.8%.

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Notably, in March 2024, for the first time after the pandemic started, the share of consumers who said that their job opportunities worsened was not higher than those who said it improved. Due to the marginal decline in May 2024, this was not the case anymore.

Chart 2 | The chart shows the shares of respondents who believed that the employment situation had improved/worsened compared to a year-ago period.

In May 2024, over 90% of the respondents said that price levels had increased when compared to the year before. The share of respondents with such views has remained over 90% since January 2021, with those saying price levels decreased remaining below the 2% mark. 

Chart 3 | The chart depicts the share of respondents’ views on the price levels of commodities over the years.

In May 2024, the share of respondents who said income levels have increased since 2023 reduced from 27.7% in March 2024 to 25.3% in May 2024. The percentage of respondents who believe their income levels have decreased has risen from 21.7% in March 2024 to 22.4% in May 2024. 

Chart 4 | The chart plots respondents’ opinions of current income levels compared to 2023.

Put together, the consistent recovery in confidence about the economy, jobs and income levels, recorded in the many months after the pandemic threat ended, paused in May 2024. The persistent problem of rise in prices, and this marginal rise in pessimism paints a worrying picture. Given that the 2024 polls were fought more on the grounds of livelihood issues such as inflation, unemployment and falling income, the new government sworn in on Monday should take a serious look at the findings of the RBI’s survey’s latest edition.

Also read |RBI survey shows why livelihood issues are in focus in 2024 polls