Consumer confidence in India: RBI study says South witnessed higher inflation

A recent study by the Reserve Bank of India (RBI) said that Southern states are more confident about current economic scenarios in the country but the Northern states are hopeful of prospects in the future. The study, titled “Consumer Confidence in India”, reports an interesting analysis of the four regions of India.

The Consumer Confidence survey measures the people’s (consumers) perception of the economy’s general health and conditions. The study feels that discord in the opinion between the Southern and Northern states could be due to the influence of inflation. The Southern states went through a higher inflation rate against the national average between 2017 and 2023. The inflation in the North remained close to the national level.

Since March 2021, the Consumer Confidence survey has been conducted in several cities segregated into four regions.

The report said that economic activity and consumer confidence are closely connected. The differences between regions arise from variations in per capita income, health, education standards, employment levels, industrial levels, infrastructure, savings and consumption habits of the people, according to the report.

The study found that the Southern states have more balanced socio-economic development than the central and northern regions. As far as industrialisation is concerned, the Southern and Western regions are ahead of the rest of the country. There is greater urbanization in these parts, with higher income levels.

The report mentioned that Karnataka, Kerala, and Tamil Nadu alone have a combined gross state domestic product (GSDP) higher than 13 eastern states, including the Northeast, as well as states such as West Bengal, Odisha, Bihar, Jharkhand, and Andaman and Nicobar Island.

“Furthermore, the average regional consumer price indices (CPI-U) are compiled using state-wise weights for urban areas and exhibit varying rates of inflation,” the study reported.

Summary

So, the recent RBI study concluded that the Southern states are more confident about the current economy because they have experienced higher inflation. But, Northern states are optimistic about the future. The survey attributes these differences in confidence to variations in development, income, and urbanization.