Indian households anticipate a moderation in inflation in the near term, though consumer confidence has dipped slightly due to tempered sentiments, according to the Reserve Bank of India's (RBI) latest forward-looking surveys conducted in January 2025. Inflation expectations had been on the rise for the past three months and remained elevated for both the short-term (three months) and long-term (one year). However, when it comes to spending, households expressed optimism about their financial outlook for the year ahead.

The survey revealed that households' median perception of current inflation declined slightly by 10 basis points (bps) to 8.3% in January, compared to 8.4% in the previous survey conducted in November 2024. Meanwhile, the median inflation expectation for the next three months increased by 20 bps to 9.3%, while the one-year ahead expectation edged up by 10 bps to 10.2%.

The RBI’s survey, conducted between January 2-11, 2025, covered 6,096 respondents across 19 major cities, with women making up 55.4% of the sample. The findings indicated a growing number of households expecting higher inflation in both the near term and the coming year. Households foresee increased inflationary pressures across multiple sectors, particularly food and housing, for both time horizons. Over the next year, inflation expectations remain closely linked to food prices and housing-related expenses.

At the same time, the consumer confidence survey pointed to subdued sentiments regarding spending on both essential and non-essential items compared to November 2024. Despite some moderation, households remain positive about their future spending capacity, the RBI noted. The Current Situation Index (CSI) dipped slightly by 0.3 points to 93.7 in January 2025, while the Future Expectations Index (FEI) saw a more significant decline of 1.2 points, settling at 120.7.

Disclaimer: This image is taken from Business Standard