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There is a yawning gap between consumer and business confidence

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  • India Inc is the most hopeful ever in 20 years in terms of growth prospects and profit margins.
  • Consumers worry about their incomes and are more stressed about inflation than before the pandemic started, says a report from Motilal Oswal.
  • Never before has there been such a big difference between the current assessment of the companies and the consumer sector, the report said.

India’s economic future is sandwiched between corporate optimism – fueled by improving macroeconomic factors – and consumer pessimism worried about incomes and inflation.

According to Motilal Oswal’s report, India Inc is the most hopeful ever in 20 years in terms of growth prospects and profit margins. However, consumers do not come close to these feelings.

“While the consumer spending outlook is bleak, companies appear to be very confident in maintaining a strong order book. Consumers remain significantly less optimistic than the pre-Covid period,” said the Motilal Oswal report based on the industry outlook and central bank consumer confidence surveys for the first half of FY23.

Consumer confidence has nearly halved since the start of the pandemic, as has the industrial outlook. While the latter showed a dramatic recovery, consumer confidence remained low even in the first quarter.

“Never in the past has there been such a big difference between the current assessment of the companies and the consumer sector. Obviously, only one of these two agents will be right in the future,” said Motilal Oswal.

Fast track mode or not?

Some of the confidence in industrial growth could come from business performance showing signs of recovery, according to a Bank of Baroda economic research report on Q1 performance. The report says the positive Q1 performance leads to the conclusion that it is in fast track mode – but a deeper analysis reveals a base effect on these numbers.

“Nevertheless, it may still be reasonable to conclude that the worst is behind us and that several sectors are on the right track, while others continue to face challenges,” the BoB report said.

Consumers, on the other hand, have not seen such signs of their own income and are more stressed about inflation than before the pandemic started. While most companies tend to say their employee sentiment is high, consumers continue to worry about their job prospects.

In July, the urban unemployment rate rose to 8.2% from 7.8% in June, although the overall unemployment rate fell on the back of a pick-up in agricultural activity.

Motilal Oswal hopes the optimism shown by the companies will materialize, but believes consumers can remain cautious as their financial position has deteriorated significantly.

“If so, the expectation of a strong order book may actually reflect a shift in market share from privately held/unorganized/small to publicly traded/organized/large companies, rather than the overall broad improvement in the real economy” the spokesman said. research firm said.

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