Indians households will cut down their shopping expenditures even further in the coming months, adding more woes to an already stressed economy. The RBI’s latest forecast on India’s private consumption expenditure shows that the economy is not in for a respite any time soon from a painful slowdown. The Reserve Bank of India has substantially cut down annual forecast for India’s expenditure on consumption (PFCE) to grow at a mere 5.5 per cent now, dramatically slower than 8.1 per cent projected in March 2019. The lower forecast for PFCE, per RBI’s November bulletin, reflects lower households demand as indicated by moderation in the production of consumer durables.
Earlier this week, a sharp contraction in industrial production also showed continuing stress in the consumer goods sector. The output of consumer durables and consumer non-durables fell 9.9 per cent and 0.4 per cent respectively, according to the Ministry of Statistics and Programme Implementation (MOSPI). Even the bank credit on consumer durables shrank 13.6 per cent in the financial year so far, going by the RBI data
PFCE includes final consumption expenditure of households and non-profit institutions serving households like temples, gurdwaras. The final consumption expenditure of households relates to the expenditure on new durable or non‑durable goods and services. This consumption expenditure also includes the imputed gross rent of owner‑occupied houses, and payments in kind of wages and salaries valued at cost such as provision for food, shelter, and clothing to the employees.
The growth in PFCE in the first quarter of the current fiscal year stood at 4.1 per cent, which was 7.2 per cent in the same period last year, and 10.4 per cent in the last quarter of FY18. Meanwhile, investment in India is also likely to decline in the near-term. The RBI has also cut down the annual forecast for investment (GFCF) by 3.4 percentage points from 9.4 per cent to 6 per cent.