Inflation squeeze and rising pessimism: 7 in 10 Indian households surveyed experiencing an over 10% increase in their monthly expenses in the last 3 months with average increase over 15%

May 20, 2022, New Delhi: The rise in prices of petrol, diesel, edible oil, household essentials and other related products and services in the last 3 months, due to the ongoing geopolitical tension fuelled by Russian invasion on Ukraine, has had an adverse impact on household finances. As per the latest data by the Ministry of Commerce and Industry, the wholesale inflation in April 2022 rose to 15.08%, the highest rise in over 16 years. It added that the April inflation was primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, food articles, non-food articles, food products and chemicals & chemical products, etc. India's annual wholesale price-based inflation accelerated to 13.11% in February from 12.96% in January 2022. The RBI earlier hiked the key policy interest (repo) rate by 40 bps to 4.40% with immediate effect in order to contain the spike in inflation and re-anchor the inflationary expectations of households. RBI Governor Shaktikanta Das had warned that the inflationary pressure may stay for a longer period than expected.

Taking cognisance of rising inflation in India and thousands of posts and comments from consumers across the country in the last 3 months discussing the subject of price rise, LocalCircles via its latest survey has attempted to understand from the consumers, bottoms up, about how much their monthly household expenses have risen in the last 3 months February-May and what do they anticipate in the next 3 months of May – August. The survey received more than 23,500 responses from over 12,000 households located across 323 districts of India. 62% respondents were men while 38% respondents were women. 42% respondents were from tier 1, 31% from tier 2 and 27% respondents were from tier 3, 4 and rural districts. The survey was conducted via LocalCircles platform and all participants were validated citizens who had to be registered with LocalCircles to participate in this survey.

70% Indian households surveyed say their monthly expenses have risen by over 10% in the last 3 months with average increase being over 15%

The question in the survey asked citizens, “How much have your monthly household expenses increased in the last 3 months due to higher prices of petrol, diesel, edible oil, household essentials and other related products and services?” In response, only 2% of Indian households said their “Monthly household expenses are still the same” while 4% said their expenses “Have actually reduced”. Breaking down the poll, 22% said their household expenses has risen by “Up to 10%”. 29% said it rose “10-20%”, 26% said “20-30%”, 10% said “30-40%”, 2% said “40-50%” and 3% said “Over 50%”. On an aggregate basis, 70% of Indian households surveyed say their monthly expenses have risen by over 10% in the last 3 months with the average increase being over 15%. Overall, 92% households are seeing their month expenses rising. This question in the survey received 11,808 responses.

55% Indian households surveyed anticipate their monthly expenses to rise by over 10% in the next 3 months while 26% anticipate the increase to be up to 10%

With the geopolitical situation being what it is, the COVID uncertainty still prevailing and the overall economic situation, the next question asked Indian households, “Where do you anticipate your average monthly household expenses to be in the next 3 months given the geopolitical situation and the Indian economy?” In response, only 5% “Anticipate monthly household expenses to still be the same”. Breaking down the poll, 26% said they anticipate further increase by “up to 10%”, 31% said “10-20%”, 19% said “20-30%”, and 5% said “30% or more”. There were also 2% of households who anticipate monthly household expenses to reduce by “up to 10%”, 1% said by “10-20”, 3% said “20-30%”, and 4% said by “30% or higher”. On an aggregate basis, 55% of Indian households surveyed anticipate their monthly expenses to rise by over 10% in the next 3 months while 26% anticipate the increase to by up to 10%. Only 4% couldn’t say. This question received 11,858 responses.

In summary, the findings of the LocalCircles survey indicate that 70% of Indian households surveyed say their monthly expenses have risen by over 10% in the last 3 months with the average increase being over 15%. Overall, 92% Indian households surveyed have reported their average monthly expenses go up in the last 3 months. Given the geopolitical situation, the constrained supplies of several commodities, the COVID pandemic and the overall condition of the economy, 55% of Indian households surveyed anticipate their monthly expenses to rise by over 10% in the next 3 months while 26% anticipate the increase to be up to 10%.

The reduction in prices of petrol and diesel will likely have a major impact on household spending. The Central and State Governments must evaluate how relief equivalent to atleast INR 10 per litre can be given with a combination of central excise and state VAT such that the negative impact of rising fuel prices on household budgets can be reduced to a certain extent. LocalCircles will escalate the findings of this survey with Central and State Governments so these findings from the household consumer survey can be used as an input in the policy intervention and petrol diesel taxation discussions.