Can India's mood be captured in real time?

Bombay Stock Exchange, Asia’s oldest, was celebrating 140 years of its existence. During the celebrations, Ashish Chauhan, its MD and CEO, met Mahesh Vyas, the MD and CEO of the Centre for Monitoring Indian Economy (CMIE). “Let’s do something together for the people of India,” Chauhan suggested. And from there was born the idea of launching the most dynamic and real-time consumer sentiment and unemployment indices covering the largest ever sample size in the country.

From April this year, both indices — consumer sentiment and unemployment — are being disseminated on the BSE and CMIE websites. The data are available for free.

While BSE is a sponsor for the project and Michigan University a partner, CMIE executes it. “The BSE board,” says Chauhan, “has approved to fund the project that will be run by CMIE for five years.”

The indices are computed by interviewing households across India. The perceptions of over 39,600 households — urban and rural — are taken into account over a 30-day period. Responses (in the case of the consumer sentiment index) and unemployment rate (gauged by interviewing individuals of 15 years or more) are computed from this data at the end of every day. And, new unemployment rate and consumer sentiment index is posted on the websites at 4 am the next day. A short analysis of the results is also posted.

On June 19, for example, the average unemployment rate inched up to 9.33 per cent from 9.28 per cent the preceding day. And, the all-India index of consumer sentiments was at 100.64, falling marginally by 0.18 per cent over four days since June 16.

CMIE, says Vyas, was already in talks with Michigan University for launching similar consumer sentiment indices. Michigan University’s consumer sentiment index is widely followed globally. The university, which has a division that studies how surveys should be conducted, has joined hands with CMIE for both these surveys. It has also decided to make India a laboratory for studying its survey techniques.

“For preparing the indices,” Vyas says, “we will use our consumer pyramid survey team, covering 160,000 households every year, across income and age groups as well as geographies.”

The monthly data show how unemployment (depicted through rural, urban and all-India average indices) is rising. The trend differs, with the rural unemployment rate being lower than urban. This could be because harvesting and sowing are usually busy seasons for rural India and also because of the Mahatma Gandhi National Rural Employment Guarantee Scheme.

The data are useful especially for consumer goods companies that would like to track both the indices to determine their focus areas.

Also critical is the consumer sentiment index, which includes consumer sentiment, expectations and the index of current economic condition. These reflect how consumer sentiment impacts economic condition and vice-versa.

In early April, the economic condition index showed some improvement. However, with the consumer expectations and sentiment indices not reflecting any enthusiasm, the improvement seen in the economic condition did not last and it slipped.

From the initial reading, the primary conclusion is that economic conditions follow consumer sentiment. Economists, however, would want data over a longer period of time to draw their inferences.

“The data would be useful when we have longer time series, though the beginning is good and so is the sample size,” says Sonal Varma, the executive director and India economist at Nomura.

She adds that “globally, some weekly data are announced — like jobless and monthly payroll data in the US. In India, however, the data either comes with a lag or the sample size is not big enough.”

The Reserve Bank of India does come out with a consumer sentiment index but these are quarterly surveys. The results are used for monetary policy formation. There are also the RBI loan officers’ surveys, but those are usually not in the public domain.

Hidden undercurrents

Getting reliable and as latest as possible data on consumer sentiment and unemployment was the need of the hour, says Varma. “To understand the undercurrents, however, we have to wait for some more months, when yearly comparisons are available.” Consumer sentiment, according to her, is also driven by prospects of the job market, which means unemployment indices impact consumer sentiment.

The use of technology, such as GPS-enabled instruments and on-the-spot online data feeding, helps compile the information faster and proves that the surveyor has actually visited the place. This makes the information reliable.

Chauhan is hopeful that when a year’s history is available, analysis of different combinations of the indices would help understand the economic undercurrents better. For example, how consumer sentiment impacts economy and how unemployment impacts sentiments and so on.

“When data over a year are ready, we will prepare a detailed annual consumer sentiment report, complete with all information about the persons and households surveyed,” says Vyas. “This would be of help to CEOs of consumer companies as well as academicians.”

An RBI official, who does not wish to be named, says, “The CMIE indices are a good start. These might be tweaked as they go along, but the scope is enormous.” He adds that in India, some non-government organisations and foundations, promoted by influential professionals or industrialists, do get financial inclusion and financial health surveys conducted. “However, these are for captive use.”

CMIE is compiling the indices on daily basis and daily movements are disseminated by both CMIE and BSE. However, the daily change is calculated on the average of the previous 30 days. Some economists have raised concerns that there is no such concept of daily unemployment rate anywhere in the world and this might need to be reviewed with time. This point might be taken up during the next review, it is learnt.

Vyas says, “Once the use of the Aadhaar card increases and GST is implemented, the availability of data and their processing will help measure many more things. And, wider scale of sample and detailing like income, demography of the households surveyed as well as the other findings of consumer pyramids will help generate much better data.”

“Soon,” adds BSE’s Chauhan “we might even start getting state-wise unemployment data.”

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