India's Economy Has Moved On From The Covid Shock

Consumer confidence in India has surpassed pre-COVID levels, as renewed spending on travel and high-value purchases drives corporate earnings to new heights.

The Reserve Bank of India's bi-monthly survey reveals that the consumer confidence index for the country's current situation reached 88.5 in May, exceeding the March 2020 reading of 85.6.

Retailers and service providers are experiencing a surge in customers, with even Apple's stores in Mumbai and New Delhi witnessing an unprecedented rush upon their reopening.

This turnaround follows India's strict lockdown measures that severely restricted travel and economic activity in response to the pandemic.

Consumer confidence temporarily dipped below 50 in 2020 and 2021 but has now rebounded, primarily due to the recovery in travel and major purchases.

Domestic air traffic in India has increased by 33 per cent year-on-year in the first half of the year, surpassing pre-pandemic levels. Auto sales, a key indicator of consumer spending, are also booming.

Passenger vehicle sales for the April-June quarter reached a record high of 995,974 units, and the industry is projected to witness moderate volume growth of around 7-9 per cent this fiscal year.

This upturn in spending has positively impacted corporate performance, with companies like InterGlobe Aviation and Maruti Suzuki reporting significant increases in net profits.

Inflationary pressures caused by global commodities prices and the situation in Ukraine prompted the Reserve Bank of India to raise interest rates six times consecutively starting in May 2022.

However, with inflation showing signs of slowing down, the central bank paused rate hikes in April and June. The consumer price index has remained within the RBI's target band, with a year-on-year increase of 4.31 per cent in May and 4.81 per cent in June.