Strong consumer sentiment in rural areas

- Good performance of agriculture sector and increase in new demand from rural areas with increasing employment

Rural areas of the country fared particularly well in November, with labor participation rates rising and unemployment rates falling in these areas. For this reason, the employment rate increased from 37 percent in October to 37.5 percent in November 2022. The employment rate is the most important indicator of the labor market, and an increase in it indicates that a large portion of the working-age population has found work. Even a small increase in the employment rate translates into millions of jobs. For example, a 0.5 percent increase in November added 4.3 million jobs in rural areas of the country.

India's urban areas did not fare so well because when the labor participation rate rose, so did the unemployment rate. As a result, the employment rate increased marginally from 34.2 percent to 34.4 percent in November 2022. The Consumer Sentiment Index showed similar differences between the performance of rural and urban India in November. However, there is a huge difference between the two sectors in terms of consumer perception.

India's urban consumer sentiment index declined by 1.5 percent. While it grew by 0.5 percent in rural India in November 2022, the decline came after two months of sharp growth. The index rose by around 11.4 percent in the last two months when there were major festivals in India.

However, the decrease is very less (0.2 percent) compared to the increase (11.4 percent). It is good that consumer sentiment showed strength in India amid all the gains during the festive month of 2022. The strength in consumer sentiment in November is based on expectations that the economy will perform well in the medium term. This is especially true in rural India. Interestingly, it depends less on improving the economic environment than on doing something good in people's personal lives.

Earnings expectations have slightly improved in November 2022 compared to October compared to a year ago. Likewise, sentiments regarding improvement in household income have also improved a year ahead.

The consumer sentiment index seems to have maintained its high level even after the festive months as the wedding season has begun. This is expected to last for a few months and may lead to a pick-up in demand for consumer durables. There is also hope in the rural areas of the country as good progress is being seen in the sowing of ravi crops. Higher production and higher prices of most farm produce bodes well for rural areas. The rural index of consumer expectations rose by 1.9 percent in November 2022. It was the biggest contributor to the Consumer Sentiment Index in November.