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Inflation | Consumer sentiment improves but still below pre-lockdown level

Inflation | Consumer sentiment improves but still below pre-lockdown level

The index of consumer sentiments (ICS) improved 10.7% in July 2021 to 53.1 over June 2021, signalling a smart but incomplete bounceback after the second wave of the pandemic pulled it down to 48 in May, said the Centre for Monitoring Indian Economy. However, it was still just half of its level before the Covid-19 induced lockdowns began in March 2020 when it stood at 105.3 in February 2020.

The July 2021 index was also lower than its level during each of the five months from December 2020 through April 2021 when the index averaged 54.7. Worst, the first two weeks of August have not been good for sentiments. The ICS fell 1.6% in the week ended August 8 and then by 2% in the week ended August 15.

According to CMIE’s weekly analysis, the recovery in July was broadbased but more pronounced at the two ends of income distribution households. Households that earn less than Rs 1,00,000 a year saw best recovery with 46% improvement in sentiments in July while the rich or households with annual income of over Rs one million witnessed a jump of 16% in consumer sentiments last month.

However, the households in the middle middle-income group that earn between Rs 200,000 and Rs 500,000 and includes a little over 160 million households, saw the lowest growth of 1% in sentiments during July.

“While the recovery in sentiments in July is impressive, it needs better traction in the critical income groups. The recovery in richer households needs to be less volatile and the recovery needs to reach middle income households better,” CMIE said.

The ICS for poor households, with income less than Rs 1,00,000 a year, stood at 56.4 in July and includes 54 million households or 17% of total households in the country. On the other hand, the ICS for rich households (with annual income of over Rs one million) and consisting of three million households grew by 16.6% in July to 63.3.

Lower middle income households, with annual income in the range of Rs 1,00,000 and Rs 200,000 grew by 12.1% in July to 49.9 compared to 44.5 in June while households in the upper middle income group, with income between Rs 0.5 million to Rs 1 million saw 7.8% improvement over June.

( Originally published on Aug 20, 2021 )

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