Inflation Expectations Of Households Decline In September: RBI Survey

For the first time since January this year, Indian households expect inflation to fall.

After increasing for three successive rounds, the median inflation expectation of households moderated by 50 basis points to 10.8% for the three months ahead and by 60 basis points to 10.9% for the year ahead in September.

Consumer Pessimism Declines

Consumers reflected lower pessimism on the prevailing general economic situation, employment scenario as well as household income and expenditure. The current situation index for September improved to 57.7 when compared with the earlier rounds after May. But it remained in the negative territory.

Consumer confidence for the one-year ahead period also improved, aided by higher optimism on the general economic situation and employment scenario.

Capacity Utilisation Hit During Second Wave

At the aggregate level, capacity utilisation of the manufacturing sector declined to 60% in quarter ended June from 69.4% in the prior three months.

Due to the second Covid-19 wave, several restrictions were imposed in many regions of the country, which adversely affected capacity utilisation in the Indian manufacturing sector, the survey said. The impact was, however, less severe than that witnessed a year earlier amid the nationwide lockdown during the first wave, it said.

The low-base effect helped new orders surge in the first quarter ended June. However, on a sequential basis, new orders fell in the aftermath of the second wave, the survey said.

However, the industrial outlook survey of the manufacturing sector for the second quarter found that manufacturing companies saw a rebound in demand conditions based on production, order books and employment, after the contraction in the previous quarter because of the second wave.

Capacity utilisation improved in Q2FY22 after a decline in the preceding three months, according to the survey. Production volumes, new orders and job landscape are expected to expand further in the third quarter, along with extended improvements in capacity utilisation and overall financial situation of manufacturers.

However, input cost pressures, too, are likely to amplify in Q3, while selling prices and profit margins are expected to rise, the survey's findings suggest.