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Date : Jan 15, 2015
Inflation Expectations Survey of Households: December 2014

The Inflation Expectations Survey of Households for December 2014 (38th round) captures the inflation expectations of 5,000 urban households across 16 cities, for the next three-month and the next one-year period. These expectations are based on their individual consumption baskets and hence these rates should not be considered as benchmark of official measure of inflation. The households’ inflation expectations provide useful directional information on near-term inflationary pressures and also supplement other economic indicators.

Highlights:

I. Qualitative response from survey suggests that fewer respondents are expecting general prices to rise by ‘more than current rate’ (i.e., fewer respondents expect higher inflation) during the next three-months and next one-year, possibly reflecting adaptive response to the decline in headline inflation in recent months. Across product-groups too, the share of respondents expecting higher inflation has declined for both the horizons.

II. In terms of quantitative response, current inflation perceptions and inflation expectations (both three-month ahead as well as one-year ahead) have moderated noticeably in the current round and reached to single digits (Chart 1).

III. The survey shows that housewives and daily workers have comparatively higher level of inflation expectations based on median inflation rates. Respondents from Bhopal, Thiruvananthapuram and Bhubaneswar cities expect relatively higher inflation.

Table 1: Respondents’ Profile (Category): Share in Total Sample
Category of Respondents Share in Total (%) Target Share (%)
Financial Sector Employees 9.9 10.0
Other Employees 15.2 15.0
Self-employed 20.0 20.0
Housewives 30.0 30.0
Retired Persons 10.0 10.0
Daily Workers 10.0 10.0
Others 4.9 5.0
Note: The above sample proportion is for the round ended December 2014 survey.

Table 2: Product-wise Expectations of Prices for Three-month ahead and One-year ahead
(Percentage of respondents)
Round No./survey period 35 36 37 38 35 36 37 38
(Round ended) → Mar-14 Jun-14 Sep-14 Dec-14 Mar-14 Jun-14 Sep-14 Dec-14
Options: General Three-month ahead One-year ahead
Prices will increase 89.2 77.5 86.4 72.4 94.1 83.6 90.0 79.8
Price increase more than current rate 51.2 41.2 43.9 25.7 59.0 47.4 48.0 32.1
Price increase similar to current rate 28.4 21.5 28.8 27.0 25.7 22.0 27.4 29.9
Price increase less than current rate 9.6 14.8 13.7 19.8 9.3 14.2 14.6 17.8
No change in prices 8.3 12.7 9.0 16.5 3.5 7.4 5.5 11.2
Decline in price 2.5 9.8 4.6 11.0 2.4 9.0 4.5 9.0
Options: Food Product Three-month ahead One-year ahead
Prices will increase 88.6 77.2 85.9 72.3 93.8 82.8 89.5 79.9
Price increase more than current rate 51.9 42.3 41.9 25.2 57.6 47.0 46.2 30.7
Price increase similar to current rate 26.3 21.5 28.1 28.5 26.3 21.3 27.7 30.5
Price increase less than current rate 10.4 13.4 15.8 18.5 9.9 14.5 15.5 18.7
No change in prices 8.7 13.9 9.0 17.1 4.0 7.9 5.8 11.3
Decline in price 2.7 8.9 5.1 10.6 2.2 9.3 4.7 8.9
Options: Non-Food Product Three-month ahead One-year ahead
Prices will increase 80.6 73.1 78.5 65.1 87.5 79.5 83.8 75.1
Price increase more than current rate 42.5 37.3 34.7 21.2 48.1 42.0 36.3 26.1
Price increase similar to current rate 27.2 21.7 27.2 26.1 28.5 22.3 29.0 30.6
Price increase less than current rate 10.8 14.1 16.5 17.8 10.8 15.3 18.4 18.4
No change in prices 16.5 18.9 17.4 25.6 9.7 12.7 12.1 16.6
Decline in price 3.0 8.0 4.2 9.3 2.9 7.8 4.1 8.3
Options: Household Durables Three-month ahead One-year ahead
Prices will increase 70.5 68.9 64.0 59.7 81.5 76.9 76.8 72.1
Price increase more than current rate 35.4 35.3 27.2 20.4 44.2 42.1 33.9 27.5
Price increase similar to current rate 23.1 20.0 22.7 23.8 25.6 20.7 26.1 27.8
Price increase less than current rate 12.0 13.6 14.1 15.6 11.7 14.1 16.9 16.8
No change in prices 21.1 20.9 24.3 27.3 12.4 13.9 15.0 16.5
Decline in price 8.4 10.2 11.7 13.0 6.0 9.2 8.2 11.4
Options: Housing Prices Three-month ahead One-year ahead
Prices will increase 85.5 82.2 84.6 78.4 91.6 87.2 91.5 86.1
Price increase more than current rate 58.0 55.4 55.5 39.5 66.2 59.7 60.8 47.9
Price increase similar to current rate 21.1 17.0 20.3 24.9 19.2 17.8 22.5 25.6
Price increase less than current rate 6.4 9.8 8.8 13.9 6.3 9.7 8.2 12.6
No change in prices 10.2 11.1 11.4 13.7 4.4 6.0 5.0 6.6
Decline in price 4.4 6.7 4.0 7.9 4.0 6.8 3.5 7.3
Options: Cost of Services Three-month ahead One-year ahead
Prices will increase 83.1 78.5 79.1 71.6 90.4 84.9 87.5 81.8
Price increase more than current rate 48.0 46.4 38.8 28.4 54.8 50.6 45.4 34.7
Price increase similar to current rate 26.5 19.4 25.3 26.6 25.4 20.7 26.9 30.0
Price increase less than current rate 8.7 12.6 15.0 16.6 10.2 13.6 15.2 17.2
No change in prices 14.5 16.2 18.0 21.7 7.2 9.3 9.8 11.6
Decline in price 2.4 5.3 2.9 6.7 2.4 5.8 2.8 6.6

Table 3: Households Expecting General Price Movements in Coherence with Movements in Price Expectations of Various Product Groups: Three-month ahead and One-year ahead
(Percentage of respondents)
Round No. Survey period ended Food Non-Food Households durables Housing Cost of services
Three-month ahead period
33 Sep-13 77.9 69.2 65.9 69.4 64.2
34 Dec-13 72.5 61.9 56.1 59.8 60.1
35 Mar-14 72.0 61.6 51.7 60.3 60.8
36 Jun-14 67.8 57.8 54.0 53.1 55.2
37 Sep-14 65.1 53.9 43.9 50.1 51.7
38 Dec-14 62.0 51.9 48.5 48.3 49.5
One-year ahead period
33 Sep-13 81.6 73.2 70.9 74.8 71.8
34 Dec-13 77.8 68.8 65.2 66.7 70.0
35 Mar-14 77.9 67.7 61.3 69.4 69.9
36 Jun-14 74.0 66.5 64.3 62.1 65.1
37 Sep-14 69.1 59.0 53.3 57.7 59.7
38 Dec-14 66.8 57.8 53.5 53.3 56.6

Table 4: Household Inflation Expectations - Current, Three-Month ahead and One-year ahead
Survey Round Survey period Ended Inflation rate in Per cent
Current Three-month ahead One-year ahead
Mean Median Std. Dev. Mean Median Std. Dev. Mean Median Std. Dev.
33 Sep-13 11.8 11.0 4.3 12.8 14.5 4.0 13.5 16.0 4.0
34 Dec-13 12.3 13.2 4.4 12.2 13.9 4.7 13.5 16.0 4.0
35 Mar-14 12.2 13.3 4.3 12.3 12.9 4.1 13.1 15.3 4.3
36 Jun-14 12.6 13.3 4.0 12.5 14.0 4.4 12.8 15.0 4.3
37 Sep-14 12.7 13.8 4.0 12.7 14.6 4.4 13.5 16.0 4.0
38 Dec-14 9.0 8.8 4.2 8.8 8.3 4.5 9.3 8.9 4.6

Table 5: Factors that Explain the Total Variability
Round No. Survey period
ended
Current Three-month ahead One-year ahead
33 Sep-13 City, Age group City, Age group City
34 Dec-13 City, Gender, Age-group City, Category City, Category
35 Mar-14 City, Category, Gender, Age-group City, Category, Gender City, Category, Gender
36 Jun-14 City City City
37 Sep-14 City, Age-Group City, Age-Group City
38 Dec-14 City, Category City, Category City, Category
Note: Results based on exercise using Analysis of Variance.

Table 6: Various Group-wise Inflation Expectations for December- 2014 Survey Round
  Current Three-month ahead One-year ahead
Mean Median Std. Dev. Mean Median Std. Dev. Mean Median Std. Dev.
Gender-wise                  
Male 8.8 8.7 4.2 8.6 8.2 4.6 9.0 8.6 4.6
Female 9.2 8.9 4.1 9.1 8.5 4.4 9.6 9.2 4.6
                   
Financial Sector Employees 9.0 8.7 4.3 8.8 7.8 4.8 9.5 9.1 4.7
Other Employees 8.5 8.3 4.1 8.4 8.1 4.4 8.7 8.2 4.5
Self Employed 8.6 8.6 4.0 8.4 7.8 4.5 8.8 8.3 4.4
Housewives 9.3 9.1 4.1 9.2 8.9 4.4 9.8 9.5 4.6
Retired Persons 9.3 9.1 4.4 8.8 7.9 4.8 9.3 8.9 4.8
Daily Workers 9.2 8.9 4.4 9.1 8.9 4.5 9.6 9.2 4.8
Other category 8.3 8.1 3.9 8.5 8.1 4.2 8.8 8.2 4.5
                   
Up to 25 years 8.6 8.4 4.0 8.8 8.3 4.4 9.2 8.5 4.7
25 to 30 years 8.8 8.6 4.2 8.7 7.9 4.5 9.1 8.4 4.7
30 to 35 years 8.7 8.6 4.0 8.6 8.2 4.4 9.0 8.6 4.5
35 to 40 years 9.1 8.9 4.2 8.8 8.3 4.6 9.4 9.1 4.6
40 to 45 years 9.1 9.2 4.3 8.8 8.3 4.6 9.6 9.4 4.7
45 to 50 years 9.2 9.0 4.2 8.9 8.4 4.3 9.4 9.2 4.5
50 to 55 years 9.0 9.1 4.0 8.8 8.2 4.6 9.2 9.0 4.3
55 to 60 years 9.3 9.2 4.3 9.0 8.4 4.9 9.3 8.9 4.7
60 years and above 9.4 9.2 4.3 9.0 8.8 4.5 9.5 9.3 4.6
                   
Ahmadabad 9.6 9.7 5.3 9.1 9.4 5.5 10.9 10.1 4.9
Bangalore 4.9 4.8 2.1 5.5 5.3 2.8 4.9 4.6 2.5
Bhopal 9.7 9.7 3.4 11.2 11.6 3.6 11.9 12.2 3.8
Bhubaneswar 9.0 9.4 3.2 10.5 11.0 3.9 10.6 10.9 4.3
Chennai 9.5 8.9 3.6 8.8 5.9 4.8 9.0 6.8 4.5
Delhi 7.9 6.0 4.8 8.8 7.2 4.8 8.2 6.5 5.4
Guwahati 9.1 8.3 4.0 7.7 6.0 4.2 8.5 6.5 4.5
Hyderabad 4.9 3.3 3.6 5.7 3.9 4.2 5.8 3.9 4.4
Jaipur 10.3 9.4 4.5 7.6 6.3 4.3 10.2 9.0 4.5
Kolhapur 10.4 8.7 4.1 9.7 8.2 5.2 9.6 7.4 4.9
Kolkata 10.4 9.6 4.1 9.6 8.9 4.7 10.4 9.7 4.7
Lucknow 10.4 9.8 4.7 10.0 11.0 5.4 10.9 10.8 5.0
Mumbai 9.9 9.7 3.6 8.5 9.0 4.1 9.8 9.7 3.7
Nagpur 6.2 5.7 2.5 6.9 6.7 2.7 6.5 6.0 2.9
Patna 9.0 8.8 1.9 9.9 9.9 2.3 10.0 10.2 2.7
Thiruvananthapuram 10.2 9.9 2.1 10.9 11.0 2.7 11.6 11.8 2.4
All 9.0 8.8 4.2 8.8 8.3 4.5 9.3 8.9 4.6

Table 7: Cross-tabulation of Current and Three-month Ahead Inflation Expectations
(Number of respondents)
  Three-month ahead inflation rate (per cent)
Current inflation rate (per cent)   <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 >=16 No idea Total
<1 26 5 2 4         1 3 1             10 52
1-2 5 27 18 11 4 1 2   7 8               10 93
2-3 5 30 54 54 18 9 5 1 3 1               7 187
3-4 2 6 31 48 76 30 4 3 2 3         1     1 207
4-5 7 16 14 36 52 76 51 24 7 24 3         2 2 12 326
5-6 4 5 20 24 62 115 120 66 31 5 8   1     2 2 15 480
6-7 2 2 4 9 33 119 32 55 44 19 4 4 1       3 3 334
7-8     8   59 89 98 41 88 57 18 5 4 2 2   2 4 477
8-9   3 3 2 59 37 37 67 48 90 43 14 4 2 1     3 413
9-10 10 11 24 4 25 11 5 17 11 86 93 142 57 23 80 14 41 24 678
10-11 10 5 21 17 17 31 2 6 9 13 111 95 111 36 23 54 34 44 639
11-12 3 4 2 2 1 3 1   6 4 7 36 23 18 10 6 2   128
12-13 2   1 1 2     2 3   3 2 11 8 21 6 3 2 67
13-14           1     1 1 1   3 6 8 5 2   28
14-15       3 12 3 2 1 3 9 3 3 2   17 31 58 22 169
15-16 2 1 2 2 7 8 1 1   5 7 2 1   2 24 49 15 129
>=16 2     12 28 21 8 7 10 35 22 3 4 1 15 12 338 75 593
Total 80 115 204 229 455 554 368 291 274 363 324 306 222 96 180 156 536 247 5000
Note: The shaded cells represent the number of respondents who expressed double digit current and three-month ahead inflations.

Table 8: Cross-tabulation of Current and One-year Ahead Inflation Expectations
(Number of respondents)
  One-year ahead inflation rate (per cent)
Current inflation rate (per cent)   <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 15-16 >=16 No idea Total
<1 22 5 1   1 2       3             3 15 52
1-2 14 32 23 5 5         5               9 93
2-3   32 63 56 12 5 2     5 4   1         7 187
3-4   2 58 84 39 7 2 2 2 4 2       1     4 207
4-5   2 9 95 115 26 13 8 6 18 4   2   5 1 6 16 326
5-6     6 7 148 163 57 22 18 11 21 1 1     4 5 16 480
6-7       4 77 69 73 46 12 15 15 4 3 2 2   2 10 334
7-8 2     3 43 96 142 87 28 26 13 14 7 2 5 2 2 5 477
8-9         30 133 15 67 69 23 29 17 11 2 4 5 1 7 413
9-10     1 2 13 8 9 10 135 184 52 46 33 16 66 18 62 23 678
10-11         3 9 5 6 10 63 210 66 44 21 18 71 61 52 639
11-12       1     3 3 1 8 9 27 44 7 14 5 3 3 128
12-13       1   1   1     2 12 14 15 2 12 3 4 67
13-14                 1       5 10 5 2 4 1 28
14-15         4 1   2 4 9 2 2 2 21 45 17 43 17 169
15-16                   3 4 2     29 30 49 12 129
>=16       1 2 5   2 3 13 8 7 1 1 8 13 486 43 593
Total 38 73 161 259 492 525 321 256 289 390 375 198 168 97 204 180 730 244 5000
Note: The shaded cells represent the number of respondents who expressed double digit current and one-year ahead inflations.

1The previous round of the survey data was published on September 30, 2014 on the RBI website. The survey results are based on views of the respondents which are not necessarily shared by the Reserve Bank of India.


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