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Consumer confidence is vital for the revival of any economy. It drives spending that leads to more demand that, in turn, leads to increased production, expansion of capacities and creation of more employment leading to higher income. Though the second wave of the infection has come under control in most parts of the country and the economy has opened up almost everywhere, the economy is suffering from an overhang of low consumer confidence as detected by the survey of the Reserve Bank of India. The finding is not surprising since most households surveyed reported lower levels of income and higher levels of price of most commodities compared to a year earlier, both of which were contributions by the second wave of the pandemic and its resultant restrictions.

In its survey report released on August 6, RBI has said consumer confidence levels were weak in July and people had an especially dim view of the current situation, one of the factors that are measured by the bank. However, the future (another factor measured in the survey) seemed brighter to most with an improvement in the overall economy and return of some jobs to empty hands. This is exactly where the government and the central bank need to focus.

Both seem to be doing the right thing by keeping growth as the focus of all policies. Only growth-oriented policies such as the constant push for liquidity can lead to more businesses being set up that can generate new jobs. Banks that are shy of lending need to take a step forward to help entrepreneurs. The stock markets, and, more specifically, the retail investors are doing their bit by encouraging entrepreneurs to raise money for expansion of capacities and roll out of new ventures.

Ironically much of the recovery would depend on improved consumer confidence for which the government has to continue active policy interventions including active management of the third wave. If the people recklessly drop their safety protocol guards, or, if the government fails to step up the vaccination programme, raising the ferocity of a third wave that has been described as inevitable and imminent, consumer confidence would again take a bad hit.