India’s consumer confidence fell to an all-time low in May, as the country battles economic uncertainties from the second wave of the Covid-19 pandemic.
According to the bi-monthly Reserve Bank of India survey, the current situation index fell to a record low of 48.5 in May from 53.1 in March. A minimum score of 100 is required to denote optimism.
“The current situation index, which has been in negative territory since July 2019, fell to a new all-time low as consumer perceptions on the general economic situation and employment scenario lowered further,” the central bank report said.
The future expectations index dropped to the ‘pessimistic territory’ of 96.4 in May, as against 108.8 in March, as respondents had a dim view of the year-ahead prospects. Since the onset of the pandemic, this is the second the time future expectations index has slipped into negative territory.
“Household spending weakened in the latest survey round, with essential spending showing signs of moderation while non-essential spending continues to contract,” the central bank said.
India’s gross domestic product contracted 7.3% for the just-concluded fiscal year and many analysts have already lowered growth expectations for the current year.
The major reason for this gloomy sentiment is the havoc crossed by the second wave of the Covid-19 pandemic in April and May this year, which was far more devastating than last year’s first wave in terms of the caseload and casualties.
It has also given rise to a humanitarian crisis with hospitals in most cities overwhelmed with patients, crematoriums and burial grounds working overtime to dispose of bodies.
Most states have imposed lockdowns to contain the pandemic and this resulted in the shutting down of businesses in April and May. While some states eased the lockdown norms in June, others are maintaining the status quo as new cases and test positivity rates continue to be high.
The survey was conducted through interviews on the phone from April 29 to May 10 in 13 major cities. Perceptions and expectations on the general economic situation, the employment scenario, the overall price situation and income and spending were obtained from 5,258 households in these cities.
The bleak employment scenario has also marred consumer confidence. The unemployment rate shot up to a 12-month high at 11.9% in May compared with 7.97% in April, according to the Centre for Monitoring Indian Economy.
This was the fourth consecutive month of rises in the unemployment rate. Both urban and rural areas have been affected by rising numbers of jobless. While it is 14.73% in the cities, it is 10.63% in villages.
In May last year, unemployment soared to a record 23% as a strict countrywide lockdown was imposed to contain the spread of the coronavirus.