The RBI survey does not sing laurels of the Modi government’s handling of the economy

Perception is king, and it would be worthwhile to ask whether consumers are confident that the National Democratic Front (NDA) is competent to manage the economy — because it is important to gauge the mood of consumers across the country. Views are sharply divided on the prospects for ‘achhe din’ (good days) under the tutelage of the the Narendra Modi government.

The latest Reserve Bank of India (RBI) Consumer Confidence Survey has pointed to the gloom prevalent amongst consumers and perceived deterioration in their mood, particularly since December 2017. The comprehensive periodic survey does not sing laurels of the Modi government’s handling of the economy. Instead, it points to the distress among consumers in six metros across different categories.

From March 2017, consumers have perhaps been very pessimistic about the economic situation, jobs, income, spending and even price levels. The negative sentiment has only moved up several notches beginning December last year. Are they confident of a turnaround in the economy going forward, improvement in jobs, and better pay? At least the RBI survey points out that nearly 5,300 consumers surveyed are not very confident of positive outcome on these fronts.

The Current Situation Index (CSI) and Future Expectations Index (FEI) that form two vital components of the RBI’s periodic survey throw enough light on the mood of the nation. A big nosedive in household perception of the economy provides a telling perspective of the government’s performance by ordinary consumers in high and low spending as well as across income levels. Moving to negative from neutral on the economic situation conveys that the government may not have been able to fulfil the huge expectations of people. If one were to go by the RBI survey, consumer confidence that was hit during demonetisation of high-value currency notes never revived to pre-November 2016 levels. The survey findings need deeper analysis for the government to plan corrective action on handling of the economy.

Meanwhile, there are economists, policy experts and politicians who do not share the negative mood of the consumers reflected in the central bank survey. For instance, even the multi-member Monetary Policy Committee of the RBI headed by governor Urjit Patel was more than optimistic about economic performance in general, revival in industrial growth and investment sentiment as well as better growth in the current and next fiscal. Ask policy managers or think tanks that are considered close to the Modi government about their perception of the economy. They would sing praises to the government’s out of the box handling of governance issues and ‘far reaching’ structural changes in the economy including the roll-out of the Goods and Services Tax (GST).

The survey, however, prompts some questions. While it is true that Modi needs the endorsement of the people to push his policies, it is equally true that he has been getting the endorsement of the people — this is evident in the repeated election victories of the Bharatiya Janata Party across India. After all either a BJP or an NDA government is in power in 23 states.

Given that by April next year Prime Minister Modi will have to face his second Lok Sabha election, there is no harm in facing up to hard realities, listen to grassroots voices and focus mainly on delivery commensurate with the communication campaigns that this government runs day in and day out.