90% households fear inflation will hit hard in 2019

Less than five months into parliamentary elections, a Reserve Bank of India (RBI) survey has said that close to 90% households across 18 major cities, including Bengaluru, fear prices of food, fuel, housing and services will rise significantly in 2019.

Worse, the youth are more apprehensive of a price rise across the board in the next one year, implying they see fewer employment opportunities in 2019. A rise in inflation expectation has a direct bearing on wages and input costs of goods.

More than 85% household have said that the prices of food items will rise over next year as against 82% who felt the prices of non-food items will accelerate, according to the survey conducted by the RBI among nearly 6,000 households in Delhi, Mumbai, Chennai, Bengaluru, Kolkata, Ahmedabad, among other cities in November.

The number of people who expect prices of essential commodities to go up next year has risen in November from a similar survey conducted in September.

In November, 80.6% felt housing prices will rise on a longer term basis, higher than 77.9% who, in September, expected housing will cost more in the year to come. For a long time, the survey results have been showing households’ pessimism on property prices. The lack of demand has added to builders’ inventory.

This may have been the reason for the Centre announcing a major relief for home buyers late Saturday night. It said that no GST will be applicable on the sale of ready-to-move-in flats and buildings where the sale has taken place after the issue of completion certificate by government authorities.

The survey also showed that a whopping 83.3% of the households polled fear cost of services, too, will spike along with prices of goods. In September, lesser number of people were as pessimistic about services cost going up on a long-term basis.

Among Bengalureans, the median inflation expectation rose quicker than cities like Delhi and Mumbai.

Inflation expectation among those on the verge of retirement was maximum portraying their lack of faith in government measures to tackle price rise.

The survey, however, showed households' short term (three month) expectation of price rise was not as gloomy as that of long term.

Inflation expectations are subjective assessments of households covered in the survey and are based on their individual consumption baskets.

The results of this survey provide useful inputs to policy formulation, according to RBI.