The fall in urban sentiments in June is worrisome, observes Mahesh Vyas.<\/strong><\/p>\n

After two gruelling months under the shadow of the second wave of COVID-19, India made substantial progress in June 2021.<\/p>\n

The unemployment rate fell and the employment rate rose compared to the levels of May 2021.<\/p>\n

COVID-19 infections and deaths dropped perceptibly, six million salaried jobs came back, foreign portfolio investors returned to pour in $1.5 billion into the Indian equity markets and the stock markets continued to scale up new stratospheric levels.<\/p>\n

Tax collections improved and the finance minister announced measures to battle consequences of the second wave of COVID-19.<\/p>\n

But the Indian consumer remained resolutely unimpressed.<\/p>\n

The index of consumer sentiments fell by 1.5 per cent in June 2021 after having fallen by 10.8 per cent in May and 3.8 per cent in April 2021.<\/p>\n

The second COVID-19 wave took a heavy toll on households.<\/p>\n

Cumulatively, consumer sentiments dropped a substantial 15.4 per cent between March and June 2021.<\/p>\n

Improvement in employment or the news in June did not reverse the negativity of Indian households.<\/p>\n

Ironically, while 7.5 million out of the 7.8 million jobs added during June 2021 were in urban India, consumer sentiments declined in urban India and not in rural India.<\/p>\n

The index fell 4.3 per cent in urban India.<\/p>\n

In rural India it gained a negligible 0.4 per cent. Perhaps, the quality of urban jobs regained in June was poor compared to jobs lost earlier.<\/p>\n

Or, it would take a lot more to repair the battered sentiments of the consumer.<\/p>\n

It was an 8.8 per cent fall in the index of current economic conditions in urban India that was most responsible for the fall in the overall index of consumer sentiments.<\/p>\n

The index of current economic conditions comprises answers to two questions posed to household respondents — how’s your household income compared to a year ago and, how are these times compared to a year ago to buy consumer durables.<\/p>\n

Both these measures deteriorated in June in urban India.<\/p>\n

The proportion of urban households that claimed that their incomes were higher than a year ago dropped from 4.9 per cent in May to 4 per cent in June and those that said that incomes worsened increased from 51.4 per cent to 52.3 per cent.<\/p>\n

Similarly, the proportion of urban households that said that it was a better time to buy consumer durables declined from 3.9 per cent in May to 2.4 per cent and those that believed it was a worse time increased from 55 per cent to 61.2 per cent.<\/p>\n

In similar comparisons, rural households reported an improvement on the income front.<\/p>\n

Yet, they displayed negative sentiments towards purchase of consumer durables.<\/p>\n

The proportion of rural households that reported an improvement in their incomes over a year ago rose from 3 per cent in May to 4.1 per cent in June and those that reported a decline fell from 53.5 per cent to 50 per cent.<\/p>\n

However, this small improvement on the income front had no impact on the rural folks’ decisions to buy durables.<\/p>\n

Rural households that believed that this was a better time than a year ago fell from 2.6 to 2.5 per cent but those that believed that this was a worse time rose sharply from 54.5 per cent in May to 61 per cent June.<\/p>\n

In urban India, most major income groups reported a fall in the proportion of households that claimed an increase in their income.<\/p>\n

The fall was the sharpest in the relatively richer households.<\/p>\n

In June 2021, only 7.2 per cent of the urban households that earn more than a million rupees a year reported an increase in income over a year.<\/p>\n

In April and May this proportion was 17.1 per cent. In households that earned between half a million and a million rupees a year the fall was from 12.6 per cent in May 2021 to 9 per cent in June.<\/p>\n

The fall was smaller for households with lower incomes, but the proportion of households that reported an increase in income is also very low, in low single digits.<\/p>\n

This fall in perceptions regarding household income perhaps, had a telling impact on households’ willingness to buy consumer durables.<\/p>\n

Every major household income group in urban India saw significant deterioration in their desire to buy consumer durables in June 2021 compared to the status in May 2021.<\/p>\n

Recovery of the Indian economy from the steep fall it suffered in 2020-21 depends upon an improvement in the perception that households have regarding their own wellbeing and their willingness to spend on non-essentials.<\/p>\n

This is particularly important because the government seems unwilling to increase its spending and private enterprise, given its large unutilised capacities, has no logical reason to do so.<\/p>\n

During the second COVID-19 wave, spending on essentials was not curtailed like it was during the first wave.<\/p>\n

Therefore, the recovery is less likely to depend upon a release of pent-up demand.<\/p>\n

The fall in urban sentiments in June is therefore worrisome.<\/p>\n

Consumer sentiments in rural India did not shine in June ,but it remained stable.<\/p>\n

Consumer goods companies continue to remain sanguine on rural demand in 2021-2022.<\/p>\n

However, such optimism faces some headwinds.<\/p>\n

The southwest monsoon stalled towards end June. Kharif sowing till June 24 showed a 21 per cent fall compared to a year ago.<\/p>\n

A recovery is possible but, it cannot be taken for granted.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The fall in urban sentiments in June is worrisome, observes Mahesh Vyas. After two gruelling months under the shadow of the second wave of COVID-19, […]<\/p>\n","protected":false},"author":3,"featured_media":118187,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"\n