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Indian economy likely to contract by 1.5% in FY21: RBI sponsored SPF survey

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Economy may contract by 1On June 04, 2020,The Reserve Bank of India (RBI) has released the results of 3 survey’s namely -Consumer Confidence Survey (CCS) – May 2020; Survey of Professional Forecasters (SPF) on Macroeconomic Indicators  (64th round) and Inflation Expectations Survey of Households (IESH) – May 2020.

(i) CCS survey results: According to this survey, the consumer confidence has completely shrunk in May 2020 amid the Coronavirus (COVID-19) epidemic & the Current Situation Index (CSI) has come down to its historical lows. In addition, a year ahead, the Future Expectations Index (FEI) has also fallen drastically and has reached the area of ​​pessimism.

i.According to the survey, the Consumer Confidence Index (CCI), the Current Situation Index (CSI) was at 85.6 in March 2020 but in May 2020 it came down to 63.7 & in Future Expectations Index (FEI) it was at 115.2 in March 2020 but in May 2020 it came down to 97.9. This is the lowest level since March 2014.

(ii) SPF survey (64th round):

  • RBI has conducting this SPF since September 2007 & the results for the latest & 64th  round were received during May 7-28, 2020.
  • As per this survey, India’s gross domestic product (GDP) growth may contract by 1.5 % for the current fiscal year (FY21). However, the next financial year it will return to the relief of growth and will register a growth of 7.2 %.

Key Points:

i.The survey stated that Real private final consumption expenditure (PFCE)would fall by 0.5 % in the current financial year(FY21). However, it is expected to grow by 6.9 % in the next financial year.

ii.It added that, that real gross fixed capital formation (GFCF) would fall by 6.4 % in 2020-21. However, it will register a growth of 5.6 % in the next financial year 2021-22.

iii.Real gross value added (GVA) is likely to decline by 1.7 % in 2020-21 However in the next fiscal, it will likely to register 6.8 % growth due to increment in industrial and services sector activities.

(iii) Households’ Inflation Expectations Survey:
As per this survey, which is based on responses from 5,761 urban households,  households’ median inflation perception and expectations increased sharply in May 2020 as against March 2020 round of the survey.
People participating in this survey expect increasing price pressure on food products & general prices and inflation to increase over a three-month horizon as compared to the previous round.

About the Survey:
The RBI has been regularly conducting CCS. The May 2020 round covers 5,400 respondents across 13 cities (Ahmedabad; Bengaluru; Bhopal; Chennai; Delhi; Guwahati; Hyderabad; Jaipur; Kolkata; Lucknow; Mumbai; Patna; and Thiruvananthapuram) & conducted through telephonic interviews due to Covid-19 during May 5-17, 2020.
The results of this survey provide useful inputs for monetary policy.

About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed).