RBI: Households’ Inflation Expectations Survey – November, 2024

Summary

The Reserve bank of India started conducting surveys in 2023 at bi-monthly; it provides directional information on near-term inflationary pressures as expected by respondents (who were contacted by the persons conducting the surveys) and they express their views on various matters related to inflation and may reflect their own consumption patterns. RBI views are not reflected. RBI may take into consideration the views of the respondents while forming a monetary policy. But, the views of the respondents are their own and not those of RBI.

People from various sectors like self- employed, financial sector, households, seniors, retired etc have replied.

The ‘Inflation Expectations Survey of Households’ is designed to capture subjective assessments on price movements and inflation.

It also gathered the data based on individual consumption baskets in 19 cities, including Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kolkata, Lucknow, Mumbai, Nagpur, Patna, Raipur, Ranchi, and Thiruvananthapuram.

Interesting facts emerged from the survey conducted in November 2024 vis-à-vis data available from November 2023 or earlier.

Now the details of survey

On 6^th December 2024, the Reserve Bank released the results of November 2024 round of its bi-monthly inflation expectations survey of households. The survey was conducted during November 2-11, 2024, in 19 major cities, with 6,091 valid responses, where female participation was 52.9 per cent. Interestingly, more women than men answered.

Let us look at the important survey which throws light on the views of the common men/women on inflation.

The following words have been used extensively which have been explained for an average reader who may find it convenient to understand its implications.

What is an inflation?

• Inflation: Inflation is the rate at which the value of a currency is falling and consequently the general level of prices for goods and services is rising.
• Inflation is sometimes classified into three types: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation.
• Most commonly used inflation indexes are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).

What is a mean and median?

• Mean is an essential concept in mathematics and statistics. The mean is the average or the most common value in a collection of numbers.
• In statistics, it is a measure of central tendency of a probability distribution along median and mode.
• The median is the middle value in a set of numbers, where half of the numbers are above and half are below it:

The survey results are available in tables 1(a), 1(b), 2, 3, 4, 5(a), and 5(b).

It is time to look at the survey in details.

Table 1(a): Product-wise Expectations of Prices for Three Months ahead as visualized by % of respondents who answered.

Table 1(b) 

Product-wise Expectations of Prices for One Year ahead

Inflation Expectations of Various Groups: Nov-24 (Median given)

 Persons from various sectors like male, female, financial sector, self-employed, retired, or daily workers can have individual views of inflation which are reflected below.

Similarly, how does age groups reflect in perceptions of inflation?

Please read similarities or variation.

Age wise (in years)

City wise

Now, how do the household, meaning ordinary men/women living in simple houses feel about inflation, for now, three months ahead or one year ahead?

Table 3: Household Inflation Expectations – Current Perception, Three Months and One Year Ahead Expectations

Discussion

 Three months ahead duration

1. Let us get puzzled that overall price will fall within three months ahead from 79.7% to 79.3%? Surprisingly, the food price remains stagnant at 83.9%. A great optimism.

2. Non-food, household durables or cost of housing will show increasing trend of inflation while cost of services would show a declining trend.

3. With financial sector expecting an inflation of 6.7-7.2 while the overall expectations at 8.4-9.4 the variance is huge and really surprising.

4. Self-employed and retired persons, an odd combination feel the three months inflation will be 10 and 9.9.

5. Female felt lower inflation at 9.0 much lower than the overall expectations.

6. Age wise classifications: up to 25 years population feel very confident that the inflation may hover around at 8.6 much lower than the overall expectations, people with ages 30-35, 40-45, 50-55, and 60 and above years in a chorus expect much higher inflation in the next three months as compared to overall at 9.1.

7. City wise comparison: Bengaluru, the high- tech powerhouse of the world presume the lowest inflation at 6.6 as compared to the highest inflation at 10.2 felt by Chennai, another powerhouse of India. Can you believe 28% higher optimism of Bengaluru while Chennai ranks amongst the highest inflation expecting city?

One year ahead expectations

8. Let us observe that overall price will increase within three months ahead from 89.4% to 89.6%. The food product price, household durables and Cost of housing show an increasing trend.

9. Surprisingly, cost of non-good products and cost of services show a declining trend in inflation.

10. City wise comparison: Chennai expects the highest inflation at 11.8 while Ahmedabad expects the lowest inflation at 8.1.

11. Age wise expectations: 25 years or below, 40-45 years, 60 years and above expect the inflation to be much lower than the average expectation of 10.1 .

12. Male and female respondents expect the inflation at 10.1% at the same level as the average expectation.

13. Financial sector and daily workers would be happy with much lower expectations of inflation as compared to other sectors like retied persons, and self- employed who visualize a higher inflation than 10.1, the average expected inflation rate.

How do the households indicating a normal man/woman expect the general price movements in coherence with movements under various product groups?

Table 4: Households Expecting General Price Movements in Coherence with Movements in Price Expectations of Various Product Groups: Three Months Ahead and One Year Ahead – % of respondents

An interesting analysis?

• Households Expecting General Price Movements in Coherence with Movements in Price Expectations of Various Product Groups have shown a sharp revaluation under three months category under all heads.
• Surprisingly, during the period Nov2023- Nov2024, under the non-food category 73.8% expect inflation as on Nov 2024 vis-a-vis73.9% in Nov 2023.

Table 5(a): Cross-tabulation of number of respondents by current inflation perception and three months ahead inflation expectations: Nov-24 Three Months Ahead Inflation Rate (per cent) and

Table 5(b): Cross-tabulation of Number of Respondents by Current Inflation Perception and One Year Ahead Inflation Expectations: Nov-24 One Year Ahead Inflation Rate (per cent) contain information of the break- up of the number of persons who gave the inflation rate which can be read by expert statisticians or scholars well versed in Economics.

As such, I did not analyse them.

Reference:

https://rbi.org.in/Scripts/PublicationsView.aspx?id=22785

Conclusion

Inflation is normally understood in our discussions as the fall in value of our currency, Indian rupee and consequently increase in prices of goods and services. This topic is discussed at all levels of our society to express their apprehension of deterioration in way of living standards. It is interesting to know that RBI publishes every two months, a detailed survey on the same by collecting information from responses from various women/men who answer the valid questions. Any passionate person is expected to read the surveys and get realistic and officially believable information.

Due to paucity of time, details of all cities given in the survey not taken into consideration during the discussions. Interested persons may refer the survey available in RBI website.

Disclaimer: I expect readers to refer to RBI website for minute details or explanations. The above article is an attempt to appreciate the RBI website materials only. It is neither a legal advice nor any consultation.