RBI Forward-looking Survey for FY2021–22 (Part — 1 of 2)
The Reserve Bank has recently released the results of the January 2021 round of its Consumer Confidence Survey (CCS). In view of the Covid-19 pandemic, the survey was conducted through field interviews, wherever possible, and telephonic interviews elsewhere, during January 02 to January 11, 2021 in thirteen major cities, viz., Ahmedabad; Bengaluru; Bhopal; Chennai; Delhi; Guwahati; Hyderabad; Jaipur; Kolkata; Lucknow; Mumbai; Patna; and Thiruvananthapuram. Perceptions and expectations on general economic situation, employment scenario, overall price situation and own income and spending have been obtained from 5,351 households across these cities.
This is the first part of a two-part article where we will derive the insights from the RBI’s survey & try to predict the business opportunities that could emerge across various industry verticals. For the scope of this article, we are covering the following surveys — Consumer Confidence, Household Inflation Expectations, & Order Books, Inventories & Capacity Utilization Survey (OBICUS).
Consumer Confidence Survey
The motive to conduct this survey
This survey aims to find out the expectations of the consumers about their future spending. This also includes their employment expectations as well. If consumers feel they will be earning more/getting employed in the short term, then the indices will give higher point reading, else vice versa.
Inference
1. Consumers expects Economic Condition Improve in this fiscal year
2. Employment Condition will also Improve
Hence, if the Consumers will expect a better prospect going forward then it may also mean that we can expect more investment by Industries, to match the expected demand of the future
Households’ Inflation Expectations
The motive to conduct this survey
This survey gives us insights into how various families are expecting the trend of inflation in short term (next quarter) & long term (next year) horizon. If the expectations band expands in width then it shows higher uncertainty, & vice versa.
Inference
1. Households’ expects Inflation to increase in short term (1 year
2. Respondents were more uncertain about future inflation than in the past few survey rounds as reflected in the widened confidence interval [Charts 1a and 1b].
3. On average Inflation will remain Conducive
Hence, If the general inflation expectation is pointing towards rising inflation, then we could expect that saving rates in households to increase. At the same time, consumers also prefer to purchase assets like — Car, Bikes, Real estate &, etc., before the prices hike going forward.
Order Books, Inventories and Capacity Utilization Survey (OBICUS)
The motive to conduct this survey
This survey intends to gauge the strength in the balance sheets of private sector companies. Special focus is given to the orders pipeline, expected capital expenditure of companies going forward, Capacity utilization, and Inventory turnover.
Inference
1. Capacity utilization has shown a sharp rise from march low — Business is expecting a sharp rise in manufactured goods in the short term period
2. Manufacturing orders are Increasing — Thus reducing Inventory overall (Chart 2)
3. Inventory to sales ratios is increasing — Suggests strong underlying recovery for Manufacturing sectors (Chart 2)
Hence, If the Order books & Manufacturing sector is pointing towards a sharp rise in the immediate future then we could expect that the demand for manufactured could recover sharply even for Q4 of FY20 & Q1 of FY21. At the same time, consumers also prefer to purchase assets like — Car, Bikes, Real estate &, etc.
Conclusion: In this article, we have seen the consumer & Industry expectation for the upcoming financial year. The overall expectations seem positive for the short term period (if not in long term), thus we can see the inflows of FDIs & FIIs going forward also. (Please find the next part of this article - here.)
Disclaimers: All the images used in the article are taken directly from the RBI’s website.
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