Despite demonetisation, consumer sentiment Up, unemployment rate down: Survey

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Contrary to popular perception, the overall consumer sentiment rose over 210 bps to 98.75 from 96.65, while the unemployment rate fell by nearly 150 bps to 6.10 per cent during the week demonetisation was announced, according to the data by the BSE and Centre for Monitoring Indian Economy (CMIE).

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“Consumer sentiment shot up during the week of the demonetisation announcement. In a quantitative way, independent of alignment to any political party, the sentiment was good. The next week it fell a shade, though. But we don’t know what the sentiment will be later,” CMIE managing director and chief executive, Mahesh Vyas said at a BSE seminar here today.

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The survey was based on a sample size of around 10,000 households, he said.

This is despite the fact the agency claiming that demonetisation has disrupted consumption which will in turn lead to postponement in investment revival.

“Demonetisation was a big shock and I thought data will tell that the public don’t like it but when the data came in, they said they like it…There is a need for us to look at this jump compared to other jumps,” he said, adding they will keenly monitor the consumer responses on big ticket consumer durable goods.

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However, the week after the announcement, the sentiment slipped slightly to around 98.60 while the unemployment rate inched by nearly 40 bps to 6.5 per cent, he said.

Mr Vyas, however, was quick to add that “the problem is we have disrupted consumption and while disrupting consumption, we have done something more, which we have postponed quite substantially a revival in investments. We were waiting for demand to pick up so that investment picks up. Now we will have to wait.”

Overall unemployment rate in the country was at 9.19 per cent during May-August period, with the urban unemployment at 10.77 per cent, and the rural at 8.38 per cent. The consumer sentiment as end August was 101.54, from 100.1 on May 1, this year.

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CMIE observed that the consumer sentiment is inversely proportionate to household income, with the sentiment among the rich households measuring 122.36 during May to August, while among the poor households it was 91.55.

Rural India recorded better consumer sentiment with 100.91 compared to urban which reported 96.35.

The CMIE data for the January-August period revealed that consumer expectations were higher than current economic conditions, indicating that they believed in better prospects for future.

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