What Is RBI’s Inflation Expectations Survey of Households (IESH)?

What Is RBI’s Inflation Expectations Survey of Households (IESH)?

In this article, ”What Is RBI’s Inflation Expectations Survey of Households (IESH)?”, we will read about IESH, CCS V/S IESH, Summary of January 2023 IESH, etc.

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IESH In News?

• On February 08, 2023, the Reserve Bank released the results of January 2023 round of its bi-monthly Inflation Expectations Survey of Households (IESH) along with Consumer Confidence Survey (CCS).
• IESH Sample Size: The Inflation Expectations Survey of Households (IESH) was conducted from January 2-11, 2023 across 19 major cities, involving 6,024 urban households.

About RBI’s Inflation Expectations Survey of Households (IESH)

• The IESH survey is conducted at bi-monthly intervals by the Reserve Bank.
• It provides directional information on near-term inflationary pressures as expected by the respondents and may reflect their own consumption patterns.
• Hence, they should be treated as households’ sentiments on inflation.
• All estimates of inflation expectations are given in the form of medians, unless stated otherwise.

CCS V/S IESH

CCS

• The CCS presents the current perceptions (vis-à-vis a year ago) and one-year ahead expectations on general economic situation, employment scenario, overall price situation and own income and spending across 19 major cities.
• These include, Ahmedabad, Bengaluru, Bhopal, Bhubaneshwar, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kolkata, Lucknow, Mumbai, Nagpur, Patna, Thiruvananthapuram, Chandigarh, Ranchi and Raipur.

IESH

• The household inflation expectations survey highlights the households’ inflation perception for the current period as of January 2023.

Summary of January 2023 IESH

The IESH survey was conducted during January 2 to 11, 2023 in 19 major cities with responses from 6,024 urban households.  Female respondents accounted for 49.7 per cent of this sample.

Summary

• According to the IESH survey, households’ inflation perception for the current period moderated by 20 basis points (bps) to 9.6 per cent in January 2023.
• Inflation expectation of households rose by 10 bps for the three-month ahead period, whereas their one-year ahead expectations remained unchanged from November 2022 round of the survey.
• Within the consumption categories, the proportion of respondents perceiving price rise was highest for the food group for both the horizons, as also witnessed in the previous two survey rounds Respondents expect higher price pressures for household durables and cost of housing over the next three months, when compared to the previous survey round.
• City-wise, the range of inflation expectations was 7.4-12.8 per cent over three-month horizon and 8.3-13.3 per cent over one year horizon, the survey said.
• According to the survey, 78 per cent of those surveyed said the cost of housing prices would increase against 76 per cent in the next three-month period.
• In the year ahead period, about 87.4 per cent of those surveyed said the cost of housing prices would increase against 86.5 per cent in the previous survey in November 2022.
• About 88 per cent believed food prices would increase in the year ahead period as against 87.1 per cent in the November 2022 survey.
• For household durables though, 80.8 per cent said prices would increase as against 77.6 per cent in the previous survey in November 2022.
• For non-food products, 86.7 per cent expected prices to increase as against 85 per cent in the previous survey in the year ahead period.

 

Important Fact In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a Constitutional basis for the implementation of the flexible inflation targeting (FIT) framework. The act allows the Centre to set the inflation target in consultation with the RBI once every five years. On that basis, India’s inflation target was set at 4 % with a 2 % extension in the upper bound and 2 % in the lower bound.

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