While the index of consumer sentiments grew 0.9% in May, the cumulative growth for the first five months of 2023 was 17.4%, a tad lower than 17.9% in the corresponding months of 2022, CMIE said in its labour market analysis.
According to CMIE, while consumer sentiments have been rising steadily during 2023, the rate of increase has been falling. “During January and February, the rate of increase was 4-5% while in March and April the growth rate fell to 3% and then in May, it fell to less than 1%,” it said.
CMIE said going forward, the monthly growth in the ICS can be expected to be a bit volatile. “In the coming months of 2023, the ICS could face challenges from the monsoon, which is already quite delayed and precipitation is expected to be below the long period average,” it said.
“Elections in large states towards the end of the year could also cause some volatility in consumer sentiments as political parties are inclined to give and promise freebies,” it added.
While rural consumer sentiments increased by 1.2% in May, urban sentiments increased by only 0.5%, reflecting the gains farmers have made from the rabi crop that was harvested in the past two months.As per the CMIE, the biggest source of growth in the ICS during April and May was the Index of Current Economic Conditions (ICC) in rural India. The ICC for rural India grew by 2.9% in May when the overall ICC grew by a mere 0.9%, it said, adding that the ICC for rural India spurted particularly well during the last three weeks of May when the income effects must have kicked in quite effectively.However, while the rural ICC has performed well, the rural ICE (Index of Consumer Expectations) has not been similarly upbeat, CMIE said.
As per CMIE, the growth in rural ICE stagnated in May after it grew by 2.3% in April. “This lacklustre performance of the ICE in April and May adds to uncertainty regarding consumer sentiments in the coming months,” it said.
Citing the falling growth rates and challenges from rural India, CMIE said, “we need to watch the progress of the monsoon and government interventions to see how Indian households prepare to spend during the 2023 festive season, which is just a little over a quarter away as consumer sentiments will matter”.