Consumer confidence weakened across both urban and rural India in May, with households turning more cautious about economic conditions, employment prospects and discretionary spending even as inflation expectations moved higher, according to the latest surveys released by the Reserve Bank of India.
The RBI's Urban Consumer Confidence Survey (UCCS) and Rural Consumer Confidence Survey (RCCS) showed a broad-based deterioration in sentiment during May, suggesting that despite easing headline inflation and supportive monetary policy, households remain concerned about price pressures and their impact on finances.
Urban consumer confidence fell for the third consecutive survey round, with the Current Situation Index (CSI) dropping to 90.7 in May from 95.7 in March. The Future Expectations Index (FEI), while remaining above the neutral 100 mark, slipped to 118.7 from 120.2, its lowest level since September 2023.
Rural sentiment also weakened. The rural CSI declined to 95.2 from 98.0 in March, while the FEI fell sharply to 119.3 from 125.1, reflecting weaker expectations across most parameters. Although future sentiment remains optimistic, the decline points to growing caution among rural households as well.
A common thread running through both surveys is the resurgence in inflation concerns.
The RBI's separate Inflation Expectations Survey of Households showed urban households raising their median inflation perception to 7.8% in May from 7.2% in March. Their inflation expectations for the next three months and one year ahead climbed to 9.3% each, marking increases of 80 basis points and 50 basis points, respectively.
Rural households also reported rising inflation concerns. Median inflation perception increased to 5.9% from 5.6%, while one-year-ahead inflation expectations rose to 7.2% from 6.8%. The RBI noted that both measures increased sequentially during the survey round.
The rise in inflation expectations appears to be influencing consumer sentiment. In urban areas, households became markedly more pessimistic about current prices, while perceptions of inflation also worsened, with more respondents reporting an acceleration in the rate of price increases.
Rural households reported a similar trend. The net response on current price levels remained deeply negative at -90.0, while inflation perception rose further, indicating that households continue to experience strong price pressures despite moderation in official inflation readings.
Beyond inflation, confidence in economic conditions and employment weakened across both segments. Urban households' assessment of the current economic situation fell sharply. Rural households also moved into pessimistic territory.
Spending intentions also softened. Urban households reported weaker sentiment on overall spending, particularly discretionary expenditure, while rural households recorded a sharp fall in spending sentiment. Rural households were especially cautious on non-essential spending, where future spending sentiment fell significantly.