Consumer Sentiments Down; GDP Growth Outlook Conservative
STORIES, ANALYSES, EXPERT VIEWS
The G20 event showcased India’s growing economic might. However, according to Udit Misra (deputy associate editor of the Indian Express) “domestically, data suggests that consumer sentiment has taken a beating over the past month.”
Consumer sentiments: According to the Centre for Monitoring Indian Economy’s (CMIE) Economic Outlook, consumer sentiments fell by 1.5 per cent in August 2023. Consumer sentiments were rising every month since January 2023. The average monthly growth in consumer sentiments in India during the January-July months of 2023 was 2.6 per cent. Sentiments are significantly worse in rural India.
This drop in sentiments, writes Misra “can have a real impact on the economy and Indian businesses who are gearing up for making the best sales of the year in the forthcoming festive season.”
According to Mahesh Vyas, the CEO of CMIE, family incomes are facing headwinds. “The proportion of households who said that their incomes were higher than a year ago was rising steadily and steeply between December 2022 (when it was 17.4 per cent) and April 2023 (when it had risen to 30.2 per cent). Then, the growth in this proportion stalled at around 30 per cent for five months till August 2023. Such stagnation has not been seen any time earlier in the past two years, which is the post- pandemic recovery period,” states Vyas in a research note.
Pessimism regarding future incomes: Vyas finds that there’s also been a rise in pessimism regarding future incomes. “The proportion of households that said that they expect their household income to rise a year into the future fell from 25.6 per cent in July 2023 to 23.7 per cent in August; this is the lowest proportion since March 2023. Further, the proportion that said that they expected their incomes to fall a year later rose from 15.3 per cent to 17.7 per cent, which is also the highest in the last three months,” he states.
GDP growth outlook: Over the medium-to-long term, India’s GDP growth, states Misra “is facing all kinds of headwinds such as a slowing global economy, high oil prices and climate change to name a few. Different economists are trying to figure out what is likely to be India’s average growth rate over the coming decade.”
A new research paper by three economists — led by Dibyendu Maiti of the Delhi School of Economics — has projected a sobering picture. According to them, 'the Indian economy cannot grow more than 5% over the coming decade in a business-as-usual scenario'.
While a growth rate of 4% to 5% will still be attractive from a global perspective, Misra writes “the fact is, it is most unlikely to be sufficient from the domestic perspective where millions upon millions of young Indians need jobs.”
