The present Government came to power in month of May 2014, the day the incumbent PM was sworn in as Prime Minister of India. The win was a landslide win and such a massive win that main opposition party could not garner enough seats to qualify for ‘Leader of Opposition’ role. The massive victory was probably an indicative mandate of common people against the then government and also expectations of the future. 2.5 years have passed since. Are people disillusioned or are they more confident or are they are on tenterhooks? Don’t know whether there is a single answer for anyone of them….There may be many views and will surely attract lot of political overtones and also reference to number of state elections that has happened after that.
To many, GDP and its growth is the main indicator, while for some and especially common people/ consumer, GDP is more an economic number that does not reflect their daily well being. There are also aspersions being cast on the sanctity of the GDP number because of the change in the methodology of calculation in recent past.
So how does one should go about? One way is to understand measure & compare general consumer confidence in different economic aspects (that impacts their daily lives). This is exactly what RBI measures quarterly and publishes in its portal. The ‘RBI Consumer Confidence Survey’ as per the latest release, is done on a sample of 5000 respondents from the 6 metros (Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai & New Delhi). Here are a few details to understand before we jump to the analysis:
- The survey is done quarterly. So June-Sep 2016 is latest survey and was released in October. It had 5000 respondents
- June-Sep 2014 (first quarter of new Government). The survey was done on 5200 respondents, again across all 6 metros
- Jan-March 2014 survey (last quarter before the current Government was sworn in). The survey was done on 4000 respondents
- Key metrics that we will compare:
- Current Situation Index: An assessment on respondents perceptions on general economic conditions and their financial positions during the current period
- Future Expectation Index: An assessment on respondents perceptions on general economic conditions and expected financial positions for the year ahead
- Net Responses: The difference between the number of respondents who voted ‘Improved/ Will Improve’ and those who voted ‘Worsen/ Will Worsen’ depending on whether current period is being discussed or the year ahead
The first chart (Chart 1) compares the overall ‘Current Situation Index’ (CSI) and the ‘Future Expectation Index’ (FEI) for the above quarters. The key aspect to note here is the noticeable jump of CSI from 99.9 in Mar14 to 105 in Sep14, reflecting the positive consumer sentiment from the change in government. More importantly FEI (reflecting a consumer confidence of the year ahead) also increased significantly from 114.9 to 123.2. The comparison between Sep14 and the Sep16 data, interestingly shows that the level of confidence has remained the same (there may been volatility in-between though!).
Now let us move into a few detailed parameters. First is consumer perception on general economic conditions. Economic changes take time to reflect and hence possibly this indicator shows negligible improvement from Mar14 to Sep14 but a significant positive skew by Sep16. The measure here is “Net Responses” as has been explained earlier. Similarly price level perceptions also show a significant positive movement from Mar14 to Sep16.
What is intriguing is the survey output on consumer ‘perception on Income’ and ‘perception on spending’. Net responses indicates that consumer today (Sep16) are less confident on their ‘incomes to rise’ than what they had in Sep14. Sep 14 data indicates that the change in Government had an immediate positive impact on this perception. Similarly ‘perception on spending’ net responses also indicates that consumer confidence has gone to Mar14 levels after seeing a positive skew immediately following the change in Government.
The readings of Chart 3 gets corroborated by the confidence level indicated by net responses in the survey on ‘perceptions on employment’ (Chart 4). Here again it drops to negative (-0.2) similar to Mar 14 (-0.4) despite a sudden increase in confidence just after the new Government came to power (Sep 14 figure is 7.3). A negative confidence here perhaps indicates that more people expects that employment opportunity will decrease compared to those who thinks that it will increase.
For a layman like me, it seems an apparent contradiction that more people are confident of today’s general economic conditions and also future expectations but when it comes to their confidence on indicators that reflects their behavior (income & spending, employment), it shows a marked deterioration compared to Sep14 figures. While truly, general economic conditions have more factors beyond income, spending & employability, a fair conclusion from the above analysis can be that, people are still being positive but there is a growing concern on any actual improvement in their well being. A point to note here is that the deteriorating trend for income & spending does not augur well for an economy as rolling of money is an important catalyst for economic growth of the country. While in a global economy, not all factors can be controlled by an individual country but people are surely looking forward to see more tangible outcome of those changes which they had perceived to happen post new Government coming in.
Source: The survey data is from RBI website (http://rbi.org.in> Publications> Quarterly). More details can be found in the individual reports available for all in RBI website.