Consumer confidence in India hit historic lows due to the virus outbreak, according to the Reserve Bank of India.

Household income was impacted the most by the pandemic-induced restrictions, causing consumer confidence to hit multiple lows during this period, the central bank says in its monthly bulletin.

The effect of lower incomes is seen on consumers’ perception about general economic situation and employment as well, RBI says in its Consumer Confidence Survey, adding that these parameters seem to be the major drivers of lower discretionary spending by consumers. “Overall spending has been shored up by essential spending, which is mostly influenced by prices.”

Sentiments of consumers in severely impacted cities – Mumbai and Delhi -- were more affected as compared to that for respondents in other places, says RBI. “Despite the support and relief measures, many households went through falling incomes and job losses.”

Consumers’ perception of the prevailing economic situation and their expectations for the future also influence their spending, saving and investment behaviour, says the central bank. “During economic expansion, consumers are usually more confident about their income and may spend more. On the other hand, when the economy contracts, the consumers are, generally, more pessimistic about their future and may try to save more by curbing their spending.”

Retired and pensioners were the least affected by the pandemic, the study shows.

The added uncertainty regarding future waves of the pandemic resulted in highly volatile consumer confidence since the start of the pandemic, RBI says, adding that the expectations about the future have been relatively optimistic despite being dented by successive waves of the virus outbreak.

Most countries witnessed a gradual uptick in consumer confidence after the major slump encountered when the Covid-19 pandemic first hit their shores, though it is yet to return to pre-pandemic levels in most countries, the survey says.

Sustained momentum in the ongoing reform measures by the government may help in improving the employment and income situation among households, leading to a gradual recovery in consumer confidence, it says.

While a rapid surge in Covid-19 cases has further cast a shadow on India’s economic recovery, the central bank says that Omicron may turn out to be more of a flash flood than a wave, brightening near-term economic prospects.

In another study, titled State of the Economy, RBI says bank credit is picking up in a gradual but sustained manner and the country’s digital payment ecosystem is also expanding rapidly. “In contrast, the global outlook remains clouded by considerable uncertainty. Inflation continues to mount across geographies amidst disruptions in production, supply chains and transportation,” it says.

RBI says recent trends in FDI flows at the global level and across regions and countries suggest that India has generally attracted higher FDI flows and continued to remain among the top attractive destinations for international investors.

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