Household incomes and hopes crash in lockdown

by Mahesh Vyas

The national lockdown has immediately and drastically impacted household sentiments - their current livelihood and their outlook.

The index of consumer sentiments, with a base of 100 in late 2015, fell to its lowest level immediately after the lockdown.

The monthly index of consumer sentiments had peaked at 109.6 during September 2019. In February 2020, the index was at 105.3. The March 2020 index was partly singed by the lockdown in the last week and it therefore fell to 97.3.

But, the impact of the lockdown is best seen in the weekly data of March and April 2020. The first week of March 2020 that ended on the 8th saw the index at 102.5. There were 36 reported cases of Coronavirus in India then. These were concentrated in Kerala, Delhi and Jaipur. The 14 Italians who tested positive in Jaipur and the cases in Delhi brought public attention to the virus. By the end of the second week the number of cases climbed to 96 and the index of consumer sentiments slipped to 101.8.

The third week, which ended on March 22 showed the first sign of stress in consumer sentiments. The Prime Minister addressed the nation on March 19 and explained the severity of the virus. He also announced a Janata curfew on March 22. The number of cases rose to 329 and the index of consumer sentiments fell to 98.8. This was the first time in over a year that the index had dropped below its base of 100. Besides, this was the fourth consecutive week of a decline in the index. Sentiments were turning negative in March.

A 21-day lockdown was announced late in the evening of March 24 and was effective within a few hours from the midnight of March 24-25.

The effect of this on consumer sentiments was drastic. The index plummeted to 52 by March 29, a fall of 47 per cent in a single week. The index continued to slip further in the weeks ended April 5 and April 12.

The index had never fallen so low and never fallen by such a magnitude. Evidently, households were devastated by the lockdown.

The index of consumer sentiments comprises of two sub-indices - the index of current economic conditions and the index of consumer expectations. Both fell similarly sharply.

The index of current economic conditions is derived from responses to two questions. These are - (1) how is the household getting along financially nowadays compared to a year ago - are they better off, worse off or the same as then; and (2) is now a good time or a bad time to buy durables like refrigerators, television and things like that, or is it no different from other times.

An increasing proportion of households was reporting an improvement in their finances. This proportion increased from 26 per cent in December 2017 to 36 per cent in December 2019. It has since declined - to 34 per cent in January, 30 per cent in February and 28 per cent in March.

In the last week of March, only 16 per cent of households reported an improvement in finances and in the first two weeks of April this ratio fell to less than 11 per cent. In January and February 2020, 34 and 30 per cent of the households had said that their financial condition was better than a year ago. The proportion of households who said that their finances were worse has risen from 8-9 per cent in January and February 2020 to a whopping 45 per cent in the first fortnight of April 2020.

The proportion of household that considered it to be a good time to buy consumer durables fell from 24 per cent in the first three weeks of March 2020 to 7 per cent in the last week and then to just 2 per cent in the first fortnight of April. 64 per cent of the respondents believed that this was a bad time to buy durables. Household decisions to buy durables are not based only on incomes but to a great extent on sentiments and their perceptions about their future well-being. Evidently, this perception is severely damaged during this lockdown. In the current situation, non-availability of goods in the market could have also possibly played a small role.

The index of consumer expectations is based on three views about the future. The first is about expectations of the household’s financial conditions a year later. During the last week of March 2020, only 10 per cent of the households expected their financial conditions to improve in a year. In the first fortnight of April this ratio dropped to less than 9 per cent. Earlier, this proportion used to be between 33 and 25 per cent. And, compare this with 45 per cent who said that they were worse off today compared to a year ago. So, most who are down today do not hope to recover in a year. This pessimism is particularly worrying.

The second view about the future is regarding business conditions a year later. Here, only 2 per cent of the households saw business conditions improving over the next one year and 59 per cent saw it worsening. This pessimism about the future of business in general is perhaps, feeding into their pessimism about their own well-being in the near future.

Households see a pall of gloom over the long run as well. Only 3 per cent of the households surveyed during the first fortnight of April believed that business conditions would improve in the coming five years while around 45 per cent believed that business conditions would worsen.

This extremely bleak view of the future makes the task of an economic revival after the lifting of the lockdown particularly challenging. It is important to build confidence about the future. Data suggests that the economic cost of the lockdown is huge. Incomes of nearly half the households have shrunk and most of them do not have hopes of a revival.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
9.1 +2.5
Consumer Sentiments Index
Base September-December 2015
49.1 -1.4
Consumer Expectations Index
Base September-December 2015
51.0 -1.1
Current Economic Conditions Index
Base September-December 2015
46.1 -1.9
Quarterly CapEx Aggregates
(Rs.trillion) Jun 20 Sep 20 Dec 20 Mar 21
New projects 0.96 1.42 1.17 1.62
Completed projects 0.28 0.74 0.84 0.92
Stalled projects 0.11 0.08 0.31 0.14
Revived projects 0.68 0.29 0.15 0.14
Implementation stalled projects 0.09 0.07 0.15 0.30
Updated on: 18 May 2021 8:28PM
Quarterly Financials of Listed Companies
(% change) Jun 20 Sep 20 Dec 20 Mar 21
All listed Companies
 Income -27.7 -6.3 1.6 15.8
 Expenses -27.9 -10.3 0.2 9.8
 Net profit -40.4 47.3 57.3 77.5
 PAT margin (%) 5.2 8.3 8.4 12.2
 Count of Cos. 4,404 4,404 4,378 547
Non-financial Companies
 Income -37.4 -10.5 0.2 20.4
 Expenses -37.7 -14.2 -0.7 14.8
 Net profit -55.9 31.5 53.6 66.8
 PAT margin (%) 4.5 8.1 8.8 12.6
 Net fixed assets 5.9 4.9
 Current assets 0.7 7.7
 Current liabilities -2.7 -5.6
 Borrowings 8.3 -8.0
 Reserves & surplus 4.2 16.8
 Count of Cos. 3,267 3,266 3,252 415
Numbers are net of P&E
Updated on: 18 May 2021 8:29PM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.4 0.0 -5.8
 Expenses 13.8 0.0 -6.9
 Net profit 15.2 -10.9 3.5
 PAT margin (%) 2.1 2.1 10.1
 Assets 9.8 8.1 2.4
 Net worth 8.5 4.4 0.7
 RONW (%) 3.8 3.5 11.8
 Count of Cos. 30,903 29,539 49
Non-financial Companies
 Income 14.1 -1.9 -6.6
 Expenses 14.3 -1.6 -7.7
 Net profit 21.7 -21.2 2.0
 PAT margin (%) 2.9 2.4 10.5
 Net fixed assets 5.6 9.4 -0.3
 Net worth 8.0 2.2 -0.1
 RONW (%) 6.4 4.9 13.2
 Debt / Equity (times) 1.0 1.1 0.1
 Interest cover (times) 2.3 2.0 21.1
 Net working capital cycle (days) 73 80 38
 Count of Cos. 24,728 23,541 40
Numbers are net of P&E
Updated on: 11 May 2021 3:39PM