Consumer Confidence survey is conducted by the Reserve Bank of India (RBI) in major cities of India over 5,000 respondents. (Representational photo: Reuters)

The consumer confidence dropped to a six years low in September 2019, revealed the RBI's monetary policy which was released on Friday.

The Current Situation Index (CCI) reached 89.4 in the September 2019 round of the survey. This is the lowest the index has ever reached in the Modi governance. Current Situation Index had reached 88 in September 2013 round during the UPA-2 rule.

Consumer Confidence survey is conducted by the Reserve Bank of India (RBI) in major cities of India over 5,000 respondents. The survey measures consumer perception (current and future) on five economic variables - economic situation, employment, the price level, income and spending.

The Consumer Confidence survey has two main indices

The Consumer Confidence survey has two main indices - current situation index and future expectations index. The current situation index measures the change in consumer perception over an economic issue in the last one year while the future expectations index measures what consumer thinks about the same variables, one year ahead.

A consumer confidence Index above 100 gives optimistic perception of the consumers.

Before the Modi government came to power, Consumer Confidence was in pessimism. It came back to optimism when the new government was elected. In September 2014 round, Consumer Confidence Index was 103.1. The consumers remained optimistic till December 2016 (102) round and then it waned into pessimism in the aftermath of demonetisation that happened in November 2016.

Zone of pessimism

Since then, consumer confidence remained in the 'zone of pessimism' i.e. below 100 for a good two and a half year. After around 30 months, the consumer confidence came back to optimism right before the 2019 Lok Sabha elections.

In March 2019, the consumer confidence reached 104.6 and crossed the 100 mark for the first time after the December 2016 round. However, this jump was transitory. In the subsequent rounds post the Lok Sabha elections, the consumer confidence index is on a free fall.

In the May 2019 round, the CCI dipped to 97.3 and in July it reached 95.7. In September, the CCI stands at 89.4 which is even lower than what it remained on an average in the post demonetisation era.

Future expectations

The future expectations of the consumers also worsened in the September round, the monetary policy document revealed. The future expectations index which was 124.8 in July 2019, fell to 118 in September.

"Turning to the outlook, consumer confidence for the year ahead moved lower in May, July and September rounds of the Reserve Bank of India's survey, due to ebbing of sentiments on the general economic situation and the employment scenario," the report said.