Rural sentiment soars but towns are sore

Consumer sentiments improved dramatically during the week ended May 28. The Index of Consumer Sentiments scaled up an impressive five per cent during the week. This is a sharp increase in the index during the course of one week.

It is likely that the prime minister’s extraordinary communication skills and the ad blitz by the government machinery on Modi Sarkar’s completion of three years in office has succeeded in raising consumer sentiments. BJP president Amit Shah is reported to have told the media in Delhi that the achhe din are already here. “Ask the question about achhe din to the two crore women who now have LPG cylinders. It is achhe din for them; 4.5 crore households now have access to toilets, it is achhe din for them. People who have received loans through Mudra Yojana, it is achhe din for them.”

Not many would buy the proposition that achhe din are here already and many more could be dismayed by what is being described as the promised achhe din. But, what matters is that a forceful communication works in converting people on the margins. It helps people who are willing to change their view if pushed, persuaded or even nudged a bit to do so.

It also helped that the prime minister, while inaugurating the 9.15 km long Dhola-Sadiya bridge during the last week, painted a powerful picture of the Northeast.

No one got those LPG cylinders, access to toilets or loans during the last week, and the future is a mere promise for now. But, a realisation was delivered last week. And thereby, a perception was created at least for those at the margins of belief.

The consumer sentiments indices show that the change in perceptions is essentially rural and not urban.

Rural folks have had reasons to be happier today. Loan waivers and a hike in support prices for sugarcane have helped and, most of the achievements listed by Shah have gone to the rural masses.

More importantly, early kharif sowings are up. Cash crops such as sugarcane and cotton have seen a 10 per cent increase in sowing as of May 26 this year compared to the corresponding period a year ago. The sharp increase in these sowings tells us something about the expectations in farmland India. There is optimism in the air.

Rural consumer sentiments shot up by 10 per cent in the week ended May 28. This is an extraordinary rise. Surprisingly, the May 26 announcement of stringent restrictions on cattle trade did not dampen rural consumer sentiments. Perhaps, the government understands the pulse of the people quite well. Or, it may be early to tell.

Urban India continues to suffer low consumer sentiments. Since January 2016, when we launched the BSE-CMIE-UMich consumer sentiments indices, urban consumer sentiments have been on average about four per cent lower than rural sentiments.

During the week ended May 28, the gap between rural and urban consumer sentiments widened. The urban consumer sentiments index was 13 per cent lower than the rural index.

Urban consumer sentiments are mucked by a severe shortage of jobs. Amit Shah’s communication did not help. His remark on the contrary could have spooked consumer sentiments. He has been quoted as saying: “We have tried to give new perspective to employment as it is not possible to provide employment to everyone in a country of 125 crore people. We are promoting self-employment and the government has made eight crore people self-employed.”

First, a self-employed person is also an employed person. So, if the government is promoting self-employment it is also promoting employment. There is no contradiction here. Second, self-employment is not happening. If eight crore new self-employed jobs were created then our unemployment problem would have been solved by now. Less than that were unemployed. Was this a third anniversary jumla?

Urban India faces a low and falling labour participation rate (LPR). Before demonetisation, the LPR was around 45 per cent. This fell steadily and showed up in a spuriously low unemployment rate. But now, in May, even unemployment has started to rise. This means that urban India now faces a low-and-falling labour participation rate and a low-but-rising unemployment rate. Urban unemployment was 5.3 per cent in the week ended May 28. It was 4.1 per cent in April.


Sentiment gauge


Unemployment gauge

Business Standard brings you CMIE’s Consumer Sentiments Index and Unemployment Rate, the only weekly estimates of such data. The sample size is bigger than that surveyed by the National Sample Survey Organisation. To read earlier reports on the weekly numbers, click on the dates:

November 21November 28December 4,


Consumer sentiment indices and unemployment rate are generated from CMIE's Consumer Pyramids survey machinery. The weekly estimates are based on a sample size of about 6,500 households and about 17,000 individuals who are more than 14 years of age. The sample changes every week but repeats after 16 weeks with a scheduled replenishment and enhancement every year. The overall sample size run over a wave of 16 weeks is 158,624 households. The sample design is of multi-stratrification to select primary sampling units and simple random selection of the ultimate sampling units, which are the households.

The Consumer Sentiment index is based on responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household's views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.

The unemployment rate is computed on a current daily basis. A person is considered unemployed if she states that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.

All estimations are made using Thomas Lumley's R package, survey. For full details on methodology, please visit CMIE India Unemployment data and CMIE India Consumer Sentiment.

The creation of these indices and their public dissemination is supported by BSE. University of Michigan is a partner in the creation of the consumer sentiment indices.

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