The Reserve Bank of India’s decision to leave key policy rates unchanged in its latest quarterly review is likely to leave not just industry but also consumers disappointed.
The RBI’s latest Consumer Confidence Survey for the June quarter indicates that nearly three-fourths (74.8 per cent) of Indian consumers feel that current interest rates on bank loans are high, while 77.2 per cent say their deposits do not attract enough interest.
The central bank’s decision to abstain from slashing the repo and reverse repo rates on account of inflationary fears have been appreciated only by 18.9 per cent of borrowers and 20.4 per cent of depositors, who feel that the current rates are appropriate.
Another 6.2 per cent of borrowers and 2.3 per cent of lenders were of the opinion that the RBI should have hiked rates in the quarterly review of the monetary policy.
The decision could have an impact on household spending. Around 74.7 per cent of consumers have indicated that their household spend has risen compared to one year ago, up marginally from 74.5 per cent in the previous round. Another 19.4 per cent said it has decreased, while 5.8 per cent said it has remained the same.
But only 61 per cent thought they would be spending more one year from now, while 25 per cent said it would be maintained at the same level and 14 per cent expected a decrease. This seems to indicate a lack of faith in the RBI’s ability to control price rise.
The consumers’ negative outlook can be gauged from a decline in the percentage of respondents who felt current economic conditions are favourable to 49.6 per cent in the latest survey from 50.7 per cent in previous round.
In contrast, the percentage of respondents that felt the current economic conditions were unfavourable shot up to 37.3 from 25.7. The percentage of consumers expecting an improvement in economic conditions has also fallen to 55.5 from 58.7, while the proportion expecting a deterioration of the economy has gone up to 23.6 per cent from 16.9 per cent.
The percentage of consumers that perceived a worsening of their household circumstances has also risen to 35.1 in the June quarter from 28.6 in the March quarter, even though 57.1 per cent of the respondents felt their situation has improved, compared with 56.5 per cent in the previous round of survey. But the bright spot in the survey was an increase in the percentage of consumers that were upbeat about employment conditions in the latest survey. Around 50.8 per cent of consumers were “not particularly worried” about employment in the June quarter, up from 43.6 per cent in the previous quarter.
The percentage of consumers “slightly worried” about employment prospects dipped to 28.3 and the proportion of survey respondents “quite worried” also fell to 20.9 per cent.