MUMBAI: As the covid-19 pandemic continues to spread, India’s economy has lost its main engine of growth: consumption.

A survey by the country’s central bank shows how stark is the pessimism among Indians. It also gives various worrying signs about future prospects.

The consumer confidence indices, an output of the Reserve Bank of India’s (RBI) survey of 5300 households spread across 13 cities, fell to a historic low in May. The future expectations index dropped to 97.9 in May from 115.2 in March. A reading below 100 is regarded as pessimistic while that above 100 is indicates optimism. To be sure, consumer confidence has been falling for the past one year.

The most worrying part of the survey is the despondency on employment prospects. Within two months of lockdown, nearly half of the respondents believe that employment prospects will worsen. In March about 34% of respondents felt prospects will worsen. By extension, income prospects for the year ahead too are dim. Less than 40% of Indians believe that income prospects would improve now, a fallout of the emerging pressures on wages.

Ergo, Indians do not think that spending prospects too would improve. Even one year ahead, only 64% of Indians believe spending may increase, which is down from 76% in the previous survey round in March.

An increase in pessimism should not surprise given that lockdown has wiped out non-essential economic activity. That said, what should cause greater concern is that the government’s economic package announcements don’t seem to have had any effect on sentiment.

The RBI’s survey was conducted between 5 May and 17 May through telephonic interviews. The expectations of an economic package were building up during that time and the government announced 20.9 trillion worth of package over three days ending 17 May.

This shows that measures failed to lift confidence levels, a sign even the capital markets showed in response to the announcements.

Finding the prospects for a return of consumption now looks likes searching for the needle in a pessimistic haystack. Economists are already predicting a deep recession for FY21. While some expected a swift recovery, the survey responses are a sign that this could be hard to come by.

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