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HomeBusinessPetrol, Diesel Price Cut Brings Down Households' Inflation Expectations By About 2%;...

Petrol, Diesel Price Cut Brings Down Households’ Inflation Expectations By About 2%; Check Details


The household inflation expectations increased for both three-month and one-year ahead periods by 10 bps and 30 bps, respectively. However, the RBI said that the survey done after the excise duty cut on petrol and diesel was announced showed inflation expectations decline by 190 bps and 90 bps, respectively, as compared with the survey done before the tax reduction.

In the regular round of survey before the excise duty cut on petrol and diesel, households’ three-month ahead expectation and one-year ahead expectation of inflation were 10.8 per cent and 11.1 per cent. However, in another round of the survey (May 24-28) after the excise duty cut, households’ three-month ahead expectation and one-year ahead expectation of inflation stood at 8.9 per cent and 10.1 per cent.

“Households’ median inflation perception for the current period increased by 40 basis points (bps) when compared to March 2022 round of the survey, whereas it increased by 10 bps and 30 bps for three months and one year ahead periods, respectively,” according to the Households’ Inflation Expectations Survey.

The survey was conducted during May 2 to 11, 2022 in 19 major cities. The results are based on responses from 6,062 urban households.

It added that a majority of the households expect general prices and inflation to remain high over three months and one year ahead horizons. Expectations for overall price and inflation over next one year were in sync with those for non-food products and cost of services, while three months ahead expectations were generally more aligned to those for food products and non-food commodities.

“In view of the cut in the prices of petrol and diesel on May 21, 2022, a limited follow-up survey (hereinafter called the ‘extension survey’) was conducted during May 24-28, 2022, which covered around half of the households who had responded in the regular survey round. In all, 3,036 households gave their revised expectations of inflation (quantitative) in the extension survey,” the RBI said.

In the extension survey round, inflation expectations for three months and one year ahead declined by 190 bps and 90 bps, respectively, when compared with the regular round.

In the monetary policy statement, Shaktikanta Das also said there are growing signs of a higher pass-through of input costs to selling prices. “The Monetary Policy Committee noted that inflation is likely to remain above the upper tolerance band of 6 per cent through the first three quarters of 2022-23.”

The retail inflation in India stood at an eight-year high of 7.79 per cent in April. The RBI has revised upwards its inflation forecast for 2022-23 to 6.7 per cent, compared with the 5.7 per cent projected earlier.
RBI Consumer Confidence Survey

The RBI said consumer confidence has been consistently improving since July 2021; the sentiments on the key parameters like employment and household income improved further in the latest round of the survey, though they remained in pessimistic zone.

“One-year ahead outlook of households remained in growth terrain despite marginal moderation in sentiments in the latest survey round,” it added.

Households assessed a rise in their current spending and expected it to increase further over the next one year; they expected higher essential spending whereas the sentiments on non-essential spending remained downbeat, the RBI said in the survey.

The Consumer Confidence Survey obtains current perceptions (vis-à-vis a year ago) and one year ahead expectations on general economic situation, employment scenario, overall price situation and own income and spending across 19 major cities. The latest round of the survey was conducted during May 02 to May 11, 2022, covering 6,027 responses.

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