Research Paper

Measuring financial resilience with consumer sentiment data from India

  • By Priti Yadav
    FPM Scholar
    Prof. Imlak Shaikh, Associate Professor, Accounting & Finance, MDI Gurgaon
    Journal : International Journal of Bank Marketing
    Publisher : Emerald

Purpose – Covid-19 has sparked a new wave of interest in consumer financial resilience, a growing concern that has attracted the attention of regulatory authorities, financial institutions, policymakers, and academia. There has never been a financial and health crisis as severe as Covid-19, which has wiped out the growth momentum of all nations, regardless of their stage of development. Hence, the study aims to measure the financial resilience regarding consumer’s current situation and future expectations within India's emerging market and its likely response to policy measures.

Design/methodology/approach – To investigate consumer financial resilience, we use individual household data on economic state, employment, income, and savings from the Reserve Bank of India's consumer confidence survey.  Our empirical approach is based on the temporal time series data with mixed frequency regression. Consumer’s current and future expectation indexes appears as the regressand, while credit-deposit ratio, credit outstanding, number of banks accounts and digital transactions acts main regressors.

Findings – The response of the consumer’s current situation is higher than the counterpart of the future expectations with 3.50-times; it also implies that a rise in the credit-deposit-ratio causes a positive impact on the consumer's financial resilience. A rise in the credit line results in more financial resilience. The number of bank accounts, a proxy for financial inclusion, shows an adverse impact on the consumer’s well-being; the plausible reason may be the government failing to provide financial support through banking networks to people. Digital payments (value) brings a positive impact on the current situation and future expectations of the consumer.

Practical implications – First, formulation of policies aimed at enhancing financial resilience. Second, the consumer sentiment index acts as a proxy for the financial resilience of consumers.

Originality/value – Financial resilience has emerged as one of the essential issues for policymakers. Hence, our study is one of the first empirical attempts that link consumer financial resilience and financial inclusion, credit creation, and digital financial capability.