Indians are growing more pessimistic about the economy. RBI Survey shows why

Urban consumers became more pessimistic about the economy, employment and spending in May, while professional forecasters downgraded India’s growth outlook, pointing to signs of weakening demand and weakening sentiment, according to surveys from the Reserve Bank of India (RBI) released on June 5.

RBI’s Urban Consumer Confidence Survey (UCCS) showed consumer confidence for the current period falling for the third consecutive round; The Current Situation Index (CSI) fell from 95.7 in March to 90.7 in May.

The Future Expectations Index (FEI) also fell from 120.2 to 118.7, its lowest level since September 2023. The survey was conducted in 19 cities between May 2 and May 11 and included 6,086 respondents.

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“Consumer confidence for the current period declined for the third consecutive round as the Current Situation Index (CSI) fell to 90.7 from 95.7 in the previous round,” said the RBI. He added that confidence about the year ahead, while still optimistic, had weakened, with the FEI “falling 1.5 points to 118.7, the lowest level since September 2023.”

The findings come alongside the RBI’s 100th Survey of Professional Forecasters, which lowered India’s real GDP growth forecast for 2026-27 from 6.9% to 6.5%; This reflects increasing caution regarding the economic outlook.
Households reported that current economic conditions were worsening. While the net reaction to the general economic situation decreased from minus 8.6 in March to minus 16.5 in May, expectations for the next year also decreased from 23.1 to 19.5. Employment sentiment also weakened; The net response to current employment conditions fell from minus 9.1 to minus 14.4, and future expectations also fell from 25.2 to 21.8. Inflation remained a major concern. According to the survey, 91.6% of respondents said prices increased last year, up from 89.1% in March. More households felt that the pace of price increases increased and the net response to inflation worsened, from minus 72.2 to minus 77.1.

Perceptions of income growth have also weakened. The net response to current income fell to 0.9 from 3.0 in March, while one-year income expectations fell from 48.4 to 47.1.

Consumer spending also lost momentum. The net response to general spending fell from 78.4 to 74.0, while future spending expectations fell from 81.2 to 76.6. The weakening was “primarily due to reduced sentiment on discretionary spending”, the RBI said.

Opinions, especially regarding non-essential expenses, turned negative. The net response to current discretionary spending fell to minus 0.8 in May from positive 0.8 in March; This shows that households are becoming more cautious about purchases other than basic needs. But spending on basic needs remained relatively resilient.

RBI surveys show that although economists are more cautious about India’s growth prospects, consumers remain optimistic about the year ahead, while concerns about inflation, employment and income weigh on sentiment.