Expectation that price rise in India can be put in control is fast fading out, suggests latest Reserve Bank of India survey

inflation2By Counterview Desk

The Reserve Bank of India’s (RBI’s) Inflation Expectations Survey of Households for September 2014 (37th round), which captures the inflation expectations of 4,933 urban households across 16 cities for the next three-month and the next one-year period, suggests that a higher percentage of people in India expect inflation would go up compared to June 2014. “These expectations are based on their individual consumption baskets and hence these rates should not be considered as benchmark of official measure of inflation”, RBI, which has released the survey, has said, though adding, “The households’ inflation expectations provide useful directional information on near-term inflationary pressures and also supplement other economic indicators.”

All figures are of three months ahead
All figures are of three months ahead

RBI provides four important highlights of the survey:

1. The proportion of respondents expecting general price level to rise by ‘more than current rate’ has increased marginally as compared with the previous round of survey for both three-month ahead period and one-year ahead period. However, these shares are much lower when compared to the position prevailing till March 2014 round of survey. At the product level, respondents expect some moderation in the price increase in the case of household durables and services.

2. In terms of quantitative response, both three-month ahead as well as one-year ahead median inflation expectations of households remained at elevated level.

3. The survey shows that housewives and retired persons have marginally higher level of inflation expectations based on median inflation rates. Respondents from Guwahati, Lucknow and Nagpur cities expect relatively higher inflation.

4. About 72.8 per cent (72.0 per cent in the last round) and 78.7 per cent (74.0 per cent in the last round) of respondents expect double digit inflation rates for three-month ahead and one-year ahead period, respectively.

The inflation figures show that, on an average, people in Ahmedabad expect inflation to rise by 12.1 per cent as of today, while they believe that inflation would rise by 13.8 per cent three months from now. Comparative figures show that people from four cities do not think inflation would as much as Ahmedabad as of now, but people from seven cities believe that the inflation would rise than that of Ahmedabad three months from now.




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