Rural confidence drops for sixth month as inflation fears climb

The RBI’s Rural Consumer Confidence Survey shows the Current Situation Index slipped to 90.6 in September, the sixth consecutive monthly decline. The index had been 91.7 in July and started the year at 100.5 in January, down from 100.9 a year earlier. Rural and semi‑urban households now view the economy, jobs and prices more negatively than they did a year ago.

What Happened

The net view of the overall economic climate fell from -11.9 in July to -14.1 in September. Employment sentiment dropped from -8.0 to -10.5, while income outlook moved from -8.7 to -9.9. Only about one in five respondents said their income was higher than a year ago (20.6%), while nearly a third reported a decline (30.5%). In the same period a year earlier, 24.5% said earnings rose and 26.5% said they fell. Inflation worries grew sharply. The median view of current price rise rose to 6.8%, up from 6.1% in July and 5.9% in May. Expectations for inflation a year ahead rose to 7.9%, versus 7.4% in July and 6.8% in March. More than nine in ten respondents (93.2%) said prices had gone up since last year, up from 91.6% in July, and 85.9% expect higher prices over the next twelve months. Spending sentiment stayed relatively firm. The spending net score improved to 79.6 in September from 77.4 in July. Essential‑goods spending remained strong with a net score of 84.2, while non‑essential items posted a lower net of 39.3.

Context

Even as households feel squeezed by slower income growth and higher price expectations, the Future Expectations Index stayed above the neutral mark, indicating that rural consumers still anticipate better conditions ahead, though the optimism has softened since the start of the year.