Lower inflation fails to convince people to buy

New Delhi: Rating agency India Ratings and Research  said on Wednesday that people are still cautious to loosen their purse strings as they are sceptical about the decline in inflation. “In view of softening inflation, households’ inflation expectations have also declined sharply. This should have resulted in higher consumption expenditure in the economy but consumers are still cautious and somewhat sceptical about the sustainability of trajectory of inflation decline,” said Ind Ra.

“They are in a wait and watch mode and are deferring their spending and not ready to loosen their purse yet,” it added. As a result, the rating agency claims the country’s GDP may have grown at 7.3 per cent in FY15 which is slightly lower than Central Statistics Office (CSO) estimate of 7.4 per cent. While private final consumption expenditure and government final consumption expenditure are expected to grow a tad lower,   the agency claims  that inve-stment growth could match CSO’s advanced estimate for FY15 and grow at 5.1 per cent.

The net exports, which is the difference between exports and imports in national income accounting, might have turned positive in the last quarter of FY15, said the rating agency. Although net exports for FY15 as a whole will still be negative, the agency claims it will be lower than the CSO’s estimate thereby contributing positively to the GDP growth.