New Delhi: In apparent pessimism following declining GDP and job uncertainty, a Reserve Bank of India (RBI) survey has found Indian consumers cutting down on their discretionary spends. Not only consumers, but even manufacturers remain anxious about the future.
As per the RBI’s consumer confidence survey, people’s spending on non-essential items of consumption has shrunk compared to a year ago even as they expect their overall spending to remain unchanged largely due to an increase in prices.
“Based on the Reserve Bank’s consumer confidence survey, spending on non-essential items of consumption has shrunk compared to a year ago; however, consumers expect their overall spending to remain unchanged going forward largely due to an increase in prices,” the central bank said in its monetary policy statement issued on Thursday.
Manufacturing firms polled in the industrial outlook survey of the RBI expect weak demand conditions and reduced input price pressures in the third and fourth quarter of the current fiscal.
Further, they expect further weakening of pricing power on muted output prices.
The RBI survey in November found households expecting prices to rise by 120 basis points over the 3-month ahead horizon and 180 basis points over the next year.
The misery of slowdown-hit households does not seem to end any time soon as factory output has also been in a downward spiral. The capacity utilisation declined to 68.9 per cent in Q2 of 2019-20 from 73.6 per cent in Q1 in the early results of the RBI’s order books, inventories and capacity utilisation survey (OBICUS).
Lower capacity utilisation means fewer fresh investments and hence less job opportunities in the market.
With the second quarter GDP slipping to six-year low of 4.5 per cent and very few macro indicators signalling a fast recovery, the RBI on Thursday cut GDP growth forecast for the current fiscal to 5 per cent.