RBI’s launches Inflation and Consumer Surveys to Gauge Household Sentiments

Why in News Now

The Reserve Bank of India (RBI) recently announced new round of two significant surveys – the ‘Inflation Expectations Survey of Households’ and the ‘Consumer Confidence Survey’ – to provide inputs for its bi-monthly monetary policy decisions.

On November 1, the Reserve Bank of India (RBI) announced these surveys, the ‘Inflation Expectations Survey of Households’ and the ‘Consumer Confidence Survey,’ aimed at providing valuable inputs for its bi-monthly monetary policy decisions. The next bi-monthly monetary policy review is scheduled to take place from Dec. 6- 8, 2023.

The ‘Inflation Expectations Survey of Households’ is designed to gather subjective assessments of price movements and inflation based on the individual consumption patterns of households across 19 major cities in India, including Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, and Thiruvananthapuram.

The ‘Consumer Confidence Survey’ seeks to gauge the sentiments of households on various economic aspects, including general economic conditions, employment scenario, price levels, household income, and household spending. It covers the same 19 cities as the Inflation Survey.

By capturing household perceptions and expectations on inflation and broader economic conditions through these surveys, the RBI aims to gain valuable real-time insights to inform its upcoming monetary policy decisions. The results will provide inputs to help the RBI maintain price stability and support the overall economic well-being of the nation.

RBI Survey’s overview

Key Takeaways: RBI’s Inflation Expectations and Consumer Confidence Surveys
SectionsDetails
Why in News
  • RBI announced Inflation Expectations and Consumer Confidence Surveys.
  • Aimed at gathering household-level data to inform monetary policy decisions.
Inflation Expectations Survey
  • Gauges households’ subjective assessment of inflation.
  • Covers 19 major Indian cities.
  • Seeks qualitative and quantitative inputs.
  • Tracks short and medium-term inflation expectations.
Consumer Confidence Survey
  • Captures household sentiments on economic conditions.
  • Covers 19 cities across India.
  • Includes questions on income, spending, prices, employment.
  • Provides insights into consumer behavior and outlook.
Significance
  • Supplements RBI’s models with real-time public feedback.
  • Provides high-frequency inputs for policymaking.
  • Helps anchor inflation expectations.
  • Allows preemptive actions to maintain stability.
Way Forward
  • Leverage surveys to make data-driven policy choices.
  • Maintain balance between inflation and growth.

Inflation Expectations Survey of Households

Inflation Expectations Survey of Households

AspectInformation
Conducted byReserve Bank of India
FrequencyBi-monthly intervals
PurposeCapture households’ inflation expectations
Sample SizeApproximately 6,000 households
Coverage19 cities, including Ahmedabad, Bengaluru, etc.
FocusQualitative responses on price changes
Periods Measured– Current period – Three months ahead – One year ahead
IndicatorHouseholds’ median inflation perceptions

Overview

  • Conducted by RBI to gather subjective assessments of price movements and inflation
  • Based on individual consumption patterns of households across 19 major Indian cities
  • Seeks qualitative and quantitative responses from households

The ‘Inflation Expectations Survey of Households’ is conducted by the Reserve Bank of India (RBI) to gather subjective assessments of price changes and inflation from households. It is based on the individual consumption patterns and spending habits of households across 19 major cities in India.

The survey aims to capture both qualitative and quantitative responses from households regarding their inflation perceptions and expectations. The qualitative responses provide insights into how households view inflation currently and their expectations for the future. The quantitative data provides specific numeric estimates of current and expected inflation at different time horizons.

Some of the cities covered in the survey include Ahmedabad, Bengaluru, Bhopal, Chandigarh, Chennai, Delhi, Lucknow and Mumbai among others. The pan-India coverage of households provides the RBI with a comprehensive understanding of inflation expectations across geographic regions and income levels.

Qualitative Responses

  • Expectations regarding price changes in next 3 months and 1 year

The Inflation Expectations Survey seeks qualitative responses from households regarding their expectations on price changes over the next 3 months and 1 year. Households are asked whether they expect prices in general, as well as prices of specific product categories, to increase, decrease or remain the same over these time periods.

This qualitative data provides insights into the inflation psychology and perceptions of households. Their responses can reveal early signals of changes in inflation expectations before actual price movements are observed in the economy. The 3 months and 1 year time horizons allow RBI to understand both near-term and medium-term inflation expectations.

Quantitative Responses

  • Current inflation rates
  • Expected inflation in next 3 months
  • Expected inflation in next 1 year

In addition to the qualitative questions, the survey also gathers specific quantitative data on current inflation rates as perceived by households. Respondents are asked to provide numeric estimates of current inflation as well as expected inflation rates for the next 3 months and 1 year.

The quantitative responses supplement the qualitative data by providing hard numbers on the inflation expectations and perceptions of households. The RBI can compare these quantitative estimates from households with its own inflation projections and models.

Significance

  • Helps RBI better understand public perception of inflation
  • Allows RBI to gauge sentiment on price stability

The qualitative and quantitative information gathered by the Inflation Expectations Survey provides crucial inputs to the RBI for its inflation assessment and policymaking. It helps the central bank understand public perception and psychology regarding inflation in a more granular manner.

Further, the survey allows the RBI to gauge sentiment on price stability among households. If inflation expectations are anchored, it gives the RBI room for accommodative monetary policy. On the other hand, if expectations are de-anchored, it may require pre-emptive tightening actions. By providing real-time insights into household inflation expectations, the survey becomes an important feedback mechanism for managing inflation and expectations.

Inflation Expectations Survey of Households
Inflation Expectations Survey of Households

Consumer Confidence Survey

Consumer Confidence Survey

AspectInformation
Conducted byReserve Bank of India
FrequencyEvery two months
PurposeMeasure consumer optimism or pessimism
Sample Size5,984 households
Coverage19 major cities, including Delhi, Mumbai, etc.
FocusCurrent perceptions and one year ahead expectations
Indices Constructed– Current Situation Index (CSI) – Future Expectations Index (FEI)
CSIMeasures current views on income, employment, etc.
FEIMeasures future expectations on the same variables

Consumer Confidence Survey

Overview

The Consumer Confidence Survey is conducted by the Reserve Bank of India (RBI) to gauge the sentiments of households regarding the broader economy and their own financial conditions.

The survey covers 19 major cities across India, including metro cities like Delhi, Mumbai, Chennai as well as smaller cities like Bhopal, Patna, Chandigarh etc. Responses are collected from nearly 6,000 households of varying income levels across these cities.

The pan-India coverage of the survey allows the RBI to understand household confidence and expectations across geographic regions and income segments. The urban-focused sampling is relevant as consumer spending of urban households is a key driver of domestic demand in the economy.

By gathering insights into household perceptions and expectations on a range of economic parameters, the RBI aims to supplement its growth projections and forecasts with valuable real-time sentiment data. The survey provides high-frequency household-level inputs for the RBI’s macroeconomic modeling and policymaking.

Aspects Covered

The Consumer Confidence Survey seeks responses from households on:

  • General economic conditions – current and future
  • Employment scenario – current and future
  • Price levels – current and future
  • Household income – current and future
  • Household spending – current and future

Through these questions, the RBI aims to capture household confidence and expectations on a range of interlinked economic variables that influence consumption and investment decisions. The responses provide valuable insights into consumer behavior and outlook.

Significance

  • Provides insights into economic well-being and sentiments of households
  • Inputs help RBI shape monetary policy decisions

The Consumer Confidence Survey provides important insights into the economic well-being and sentiments of households across India. By analyzing households’ views on employment, income, spending and broader economic conditions, the RBI can gauge the health of consumer demand and outlook.

Further, the survey results give high-frequency household-level inputs to the RBI for shaping its bimonthly monetary policy decisions. The RBI factors in the consumer confidence data along with other macroeconomic indicators to determine its stance on interest rates, liquidity management and other monetary policy tools.

If consumer confidence is weakening, the RBI may adopt a more accommodative stance to support demand. On the other hand, high consumer confidence can provide room for unwinding monetary accommodation. By supplementing its analysis with real-time insights into household sentiments, the RBI can take informed data-driven decisions to maintain macroeconomic stability.

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