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Inflation for the current period is expected to increase by 40 basis points (bps) to 10.1 per cent when compared to the March 2022 round of the survey, according to the Households’ Inflation Expectations Survey conducted by the Reserve Bank of India (RBI) for May.
Households’ median inflation perception has increased by 10 bps and 30 bps for three months and one year ahead periods, respectively, says the survey conducted among 3,036 households across the country.
“Majority of the households expect general prices and inflation to remain high over three months and one year ahead horizons,” the RBI survey said.
Expectations for overall price and inflation over next one year were in sync with those for non-food products and cost of services, while three months ahead expectations were generally more aligned to those for food products and non-food commodities, it said.
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The Reserve Bank’s bi-monthly monetary policy has forecast that inflation is expected to be above 7 per cent — much above the banking regulator’s comfort level — in the first two quarters of the current fiscal.
The RBI’s medium-term target for consumer price index (CPI) inflation is 4 per cent within a band of plus or minus 2 per cent.
Unveiling the bi-monthly policy review last week, the Monetary Policy Committee of the RBI projected an inflation of 7.5 per cent in the June quarter and 7.4 per cent in the September quarter. The central bank expects inflation at 6.2 per cent in the December quarter and 5.8 per cent in March 2023.
According to the RBI’s Consumer Confidence Survey, the consumer confidence index for May improved to 75.9, an improvement from 71.7 in March. However, it is still in the negative territory. This indicates consumers being with negative sentiments with signs of improvement compared to last year. The future price expectations index stood at 113 for May, while in March it was 115.2.
If the consumer confidence index is below 100, then it is in the pessimistic territory while above 100 points to optimism.
“Consumer confidence for the current period has been consistently improving since July 2021; the sentiments on the key parameters like employment and household income improved further in the latest round of the survey, though they remained in a pessimistic zone,” the RBI survey said.
One year ahead outlook of households remained in growth terrain despite marginal moderation in sentiments in the latest survey round, it added.
According to the survey, households assessed a rise in their current spending and expected it to increase further over the next one year; they expected higher essential spending, whereas the sentiments on non-essential spending remained downbeat.
EDot: Essential spending may rise
Even as the RBI raised upwards its inflation projection in its latest monetary policy meet, households — in spite of higher prices — expect their expenditure over the next year to rise, especially in the essential category, the latest survey showed.
