The Economy: Huge Gap between Expectation and Reality

By Subhash Chandra, CEO CrowdWisdom360

The RBI released forward looking reports yesterday. Consumer Confidence was close to all time low (the all time low being in the previous quarter)

The Consumer Confidence survey – The survey was conducted during February 27 – March 7, 2020 in 13 major cities, viz., Ahmedabad; Bengaluru; Bhopal; Chennai; Delhi; Guwahati; Hyderabad; Jaipur; Kolkata; Lucknow; Mumbai; Patna; and Thiruvananthapuram. Perceptions and expectations on the general economic situation, the employment scenario, the overall price situation and own income and spending are obtained from 5,365 households across these cities.

More than half of India’s urban population think that the general economic conditions have worsened (anyway supported by the poor GDP data). This has deteriorated significantly over the last 12 months. However, the Government has little to worry as nearly half the population are optimistic about the future.

What is the expectation versus reality gap?

Last year, just before the election, only 18% expected that the economic conditions will worsen in the next 12 months, in reality, 52% reported that economic conditions got worse in the last 12 months. A expectation gap of 34%

Last year, just before the election, 66% expected that the economic conditions will get better in the next 12 months, in reality, only 28% reported that economic conditions got better in the last 12 months. A expectation gap of 38%

What was the expectation gap in June 2018?

This is a year after GST was launched. 

 Just when GST was launched, only 26% expected that the economic conditions will worsen in the next 12 months, in reality, 42% reported that economic conditions got worse in the last 12 months. An expectation gap of just 16%

Just when GST was launched, 49% expected that the economic conditions will get better in the next 12 months, in reality, 35% reported that economic conditions got better in the last 12 months. A expectation gap of just 14%

The significant drop in economic performance has led to significant expectation gap. A Gap that was just 14-16% in 2018 has increased massively to 34-38% in 2020. It is clear now that the consumer confidence is at its lowest also because increasingly consumers are facing bigger disappointments than ever with respect to the economy.

The only upside was that nearly half of urban Indians were still optimistic about the economy, just before COVID-19. Post COVID-19 things are likely to have only gotten worse.