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Reserve Bank of India has recently conducted a consumer confidence survey. Which of the following statement is TRUE in regard to the survey? Statement 1: The current situation index fell to 53.1 in March from 55.5 in January, according to the Reserve Bank of India’s consumer confidence survey Statement 2: Income and prices and the current situation index had hit a record low of 49.9 in September

Reserve Bank of India has recently conducted a consumer confidence survey. Which of the following statement is TRUE in regard to the survey? Statement 1: The current situation index fell to 53.1 in March from 55.5 in January, according to the Reserve Bank of India’s consumer confidence survey Statement 2: Income and prices and the current situation index had hit a record low of 49.9 in September Correct Answer Both 1 and 2

The correct answer is option 1) which is Both 1 and 2

Solution: The current situation index fell to 53.1 in March from 55.5 in January as well as income and prices and the current situation index had hit a record low of 49.9 in September according to the Reserve Bank of India’s consumer confidence survey.

Notes:

  • As per Indian consumers turned more pessimistic about the present and less gung-ho about the future, making them less likely to spend big in an economy that’s driven by domestic consumption.
  • The current situation index fell to 53.1 in March from 55.5 in January, according to the Reserve Bank of India’s consumer confidence survey, where 100 is the dividing line between pessimism and optimism.
  • Survey respondents were also less optimistic about the year ahead, with the future expectations index dipping to 108.8 from 117.1 in the period under review.
  • The reasons for the pessimism were deteriorating sentiments on the general economic situation, income, and prices and the current situation index had hit a record low of 49.9 in September.
  • The well-entrenched inflation expectations, which are an added challenge for monetary policymakers who were forced to pause interest rate cuts last year because of gains in price growth.
  • Households’ median inflation perception for the current period as well as for the three months ahead increased by 50 basis points to 8.7% and by 80 bps to 10.1%, respectively, compared to the January 2021 survey
  • Median inflation expectations for one year ahead also remained at an elevated level.
  • Elevated inflation and negative real rates can create their own distortions such as encouraging investment in physical assets such as gold, which in turn can pressure external balances through high gold imports and lower potential growth via lower financial savings.

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