Every two months, the Reserve Bank asks several thousand Indians across rural and urban centres a set of simple questions. Is your economic situation better or worse than a year ago? Is your job more secure? Are prices rising faster or slower? What do you think is happening to your own income? Are you spending more or less? While the answers are reported regularly, they rarely get the sort of eyeballs that changes in inflation rates or the gross domestic product receive. The May 2026 round of RBI’s Consumer Confidence Surveys has just delivered a verdict that deserves more attention than it is getting. They indicate that confidence in the present is eroding, and even the customary optimism about the future is beginning to crack.
The Urban Consumer Confidence Survey, conducted across 19 cities, shows that the Current Situation Index has fallen for the third consecutive round, down to 90.7 from 95.7 just two months earlier. A reading below 100 signals that more respondents feel worse off than feel better off, and 90.7 falls in pessimistic territory. What is more telling is the trajectory of this fall, with the latter not being a one-off dip but a sustained slide.
Households’ assessment of the general economic situation fell by nearly 8 points in a single round, with the share of households reporting things had “worsened” climbing to 47.7 per cent, against just 31.2 per cent who said things had improved. Further, while the proportion of urban households which believed the current economic situation has worsened has actually gone up, while the proportion that believes things have improved has actually fallen.
Rural India tells a strikingly similar story, with its own twist. The Rural Consumer Confidence Survey, covering nearly 9,000 households, shows its Current Situation Index slipping to 95.2. The index’s net response towards the economic situation turned negative for the first time since May 2025, at minus 2.5. Even employment perceptions, which had held up reasonably well through 2025, turned negative. For the first time in over a year, more rural households believe conditions have deteriorated than improved.
What should worry policymakers more than the present-day pessimism is what is happening to expectations. India’s consumer surveys have historically shown a familiar pattern: people may grumble about today, but remain hopeful about tomorrow. That gap between current gloom and future optimism has been a quiet source of resilience in consumption behaviour. In May 2026, that gap is narrowing in both town and country.
The Future Expectations Index for urban India dropped to 118.7, its lowest reading since September 2023. Rural expectations fell even more sharply, from 129.3 in January to 119.3 in May. Worsening expectations threaten consumption demand—the largest component of growth in India. Such a decline implies that he threat is harder to dismiss as transient.
The spending data makes the mechanism visible. Urban households’ sentiment on non-essential or discretionary spending barely budged into positive territory, a net response of just 15.9, after touching 21.1 in March. Rural India shows the same pattern, with net responses on non-essential spending falling from 59.5 to 42.6 in a single round. All this, even as the both urban and rural households’ own income expectations weakened. It is not surprising then that households across India are visibly pulling back on the kind of spending that drives growth in consumer durables, retail and services, even as essentials remain non-negotiable.
There is also an inflation puzzle worth flagging. Headline inflation readings have been benign through much of this period, yet household inflation perceptions have moved in the opposite direction. Rural respondents’ median perception of current inflation rose to 5.9 percent in May, up 30 basis points from March, and their one-year-ahead expectation jumped to 7.2 percent. This is the well-known gap between what statisticians measure and what households feel at the store. It matters precisely because it is household perception, which shapes spending and saving decisions. A consumer who believes prices will rise by more than 7 percent over the coming year behaves very differently from one who trusts that inflation is under control, regardless of what the Consumer Price Index actually reports.
What ties all this together is a slowdown not in any single indicator but in sentiment itself, the intangible variable that ultimately translates into discretionary purchases, big-ticket decisions, and the confidence to take on credit. One may argue that surveys of this kind capture mood and not hard transactions, and that moods can be volatile. But when both rural and urban India report a third straight round of weakening confidence, when expectations for the future are sliding in tandem with perceptions of the present, and when discretionary spending intentions are softening across both segments, one has to stop considering this as noise and start looking at it like a signal.
Policymakers will need to listen. India’s growth story has rested heavily on domestic consumption, and consumption rests on confidence. The RBI’s own surveys are, in effect, an early warning system that the institution funds and publishes for exactly this purpose. The latest readings suggest it may be time to ask less about how fast the economy is growing on paper and more about how confident Indians actually feel about their economic futures. The latest numbers suggest that confidence, in both city and village, needs rebuilding before celebrating.
Tulsi Jayakumar | Professor, economics & policy; and Executive Director, Centre for Family Business & Entrepreneurship, Bhavan’s SPJIMR
(Views are personal)