Inflation expectations of households rose to the highest since 2014 in November, according to the Reserve Bank of India's bi-monthly survey. However, in an unusual decision, the central bank decided to redo the survey in December, with a smaller sample set. This "extension survey" showed a decline in inflation expectations following a cut in excise duties on fuel and a decline in global commodity prices, the RBI said.
The median inflation expectation of households rose by 20 basis points to 10.4% in November. However, the three-month and one-year ahead median inflation expectations saw a sharp increase of 150 basis points to 12.3% and 170 basis points to 12.6% respectively, compared to the previous survey round in September 2021. This was the highest since September 2014.
The regular survey covered 5,910 respondents.
Explaining its decision to do an "extension survey", the central bank said that price sentiments are assessed to have changed considerably in the wake of a cut in domestic excise duty on petrol and diesel and a decline in global commodity prices due to the emergence of omicron.
This survey covered 1,274 respondents.
It found that median inflation perceptions of households declined by 30 basis points for current inflation to 10.1%. They declined by 110 basis for three months ahead to 10.8% and by 140 basis points for a year ahead to 10.9%.
The conflicting surveys follow a monetary policy review where the central bank played down inflation concerns and chose to keep key policy rates and its monetary policy stance unchanged. CPI inflation, currently at 4.5%, is seen rising over the next few months and is expected to peak in the January-March quarter. However, many think that upside risks may emerge from higher input costs.
Consumer Confidence
A separate survey showed that consumer confidence continued to improve from the historic low recorded in July 2021, though it remained in pessimistic terrain.
The current situation index increased to 62.3 in November 2021 from 57.7 in the previous survey round in September. The perception for general economic situation, employment scenario and household income showed signs of recovery, the survey found.
Consumer confidence for the one-year ahead period also improved, aided by higher optimism on the general economic situation and employment scenario.
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