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Informist, Friday, Feb. 7, 2025

MUMBAI – The Reserve Bank of India's latest surveys show consumer confidence fell in January while a measure of the manufacturing sector's capacity utilisation dropped below a key metric in Jul-Sept.

Released on Friday after the central bank's Monetary Policy Committee reduced the policy repo rate by 25 basis points to 6.25%, the Consumer Confidence Survey showed both the Current Situation Index and Future Expectations Index fell in January. While the Future Expectations Index edged lower to 120.7 from 121.9 in November, the Current Situation Index dropped deeper into the pessimistic zone to 93.7 from 94.0.

"The survey manifested subdued sentiments on spending for both essential and non-essential outlays vis-a-vis the November 2024 round. Despite some moderations, the sentiments about future spending remain strong," the RBI said in a statement, adding that while households were less pessimistic about prices and inflation at present, they were both seen rising in the coming year.

A separate survey showed households' inflation expectations for the three-month and one-year horizons increased by 20 basis points and 10 bps, respectively, in January to 9.3% and 10.2%. "The share of households anticipating a rise in general prices and inflation for both near term, as well as the coming year has increased," the RBI said.

The findings of the Consumer Confidence Survey and Households' Inflation Expectations Survey are somewhat at odds with the RBI's official forecasts, which say that headline retail inflation is seen moderating from 4.8% in 2024-25 (Apr-Mar) to 4.2% in the next financial year. In FY26, CPI inflation is seen averaging as low as 3.8% in the third quarter.

In further grim news for policymakers, the RBI's Order Books, Inventories and Capacity Utilisation Survey showed the manufacturing sector's seasonally adjusted capacity utilisation dropped below the key 75% mark in the second quarter of FY25 to 74.7%. The figure had stood at 75.8% in the previous quarter.

"Manufacturers reported higher sequential growth in new orders during Q2:2024-25 (Jul-Sept). On an annual basis, however, new order growth moderated," the RBI said. Without adjusting for seasonal factors, capacity utilisation in the manufacturing sector rose to 74.2% from 74.0% in Apr-Jun.

GDP growth had unexpectedly crashed to a seven-quarter low of 5.4% in Jul-Sept, prompting sharp downward revisions in growth forecasts, including those of the RBI.  End

Reported by Siddharth Upasani

Edited by Saji George Titus

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