Noteban impact: Consumer confidence deteriorates in six top metro cities of India, admits Reserve Bank

By A Representative
In an unusual admission, the Reserve Bank of India (RBI) has said that the consumer confidence index (CCI) of people, following Prime Minister Narendra Modi’s controversial noteban decision of November 8, 2016, has “worsened” by seven points.  The result is based on a survey it carried out in six metropolitan cities.
In its Consumer Confidence Survey (CCS) report, released by India’s Central bank on February 8, said CCI reached 102 in December 2016, down from 108.7 in November 2016 on a scale of 100 a year ago.

RBI arrived at CCI on the basis of that the index it worked out for the current perception households’ perceptions of five different parameters – general economic conditions, employment scenario, income, spending, and price level and inflation.
The results show that the respondents’ perceptions for all parameters, except one, price level and inflation, deteriorated. While the survey report does not say why this is so, it is well known that, following the noteban, there was a sharp fall in people’s purchasing power, but it led to a relative deceleration in prices, particularly of perishable goods.
The survey, which carries a disclaimer that the “results are based on the feedback received from the respondents” and they “do not necessarily reflect the views of the RBI”, was conducted in six metropolitan cities – Bangaluru, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi –among 4,752 households as respondents. 

Pointing out that households’ perception on economic conditions worsened, the survey data show, as many as 30.3% of the respondents said their current perception on economic conditions “worsened” in December 2016 as against 26.6% in November 2016 and 30.1% in September 2016.
At the same time, the survey shows, the perception on economic conditions remained the same for 24.1% respondents in December 2016, as against 26.6% respondents in November 2016; and improved for 45.7% respondents in December 2016 as against 49.5% respondents in November 2016.

General economic perception (% households)

As for the perception on income, the data show that 25.8% said it had decreased in December 2016 as against 17.2% in November 2016. The survey report says, the respondents’ “outlook on income” in December 2016 “one year ahead was also less optimistic than in the November 2016 round.”
On general spending, the perception of 5.6% decreased in December 2016, as against 3.2% in November 2016. In a further breakup, the survey found that on spending on essential items, the perception decreased for 4.7% in December 2016, as against 3.1% in November 2016. And, on spending on non-essential items, 18.1% respondents said their perception decreased in December 2016, as against 11.1% in November 2016.
The survey report says, “The level of optimism on overall spending was lower for both the current period and one year ahead. This was observed for both essential and non-essential spending, though the fall was more prominent in the case of the latter.”
On the employment front, as many as 39.2% respondents said their perception worsened, as against 31.4 per cent in November 2016. The survey report does not fail to comment, “Households’ current perceptions on the level of their incomes plunged in December 2016 round to a level not seen in the recent past.”
The report further says, “Perceptions on employment worsened in the current (December) round with the net response slipping into negative territory, reversing the improvement witnessed in the November 2016 round.”