Reforms and policy easing fails to boost sentiment in India

Indian consumers' are less optimistic in May over economic outlook, in spite of easing bias by Reserve Bank of India. New reform focused government failed to boost business sentiment too.

• The MNI India Consumer Sentiment Indicator fell 2% to 119.6 in May from 122.1 in April. Though the indicator is still above 100 mark, which stand as neutral point over optimism and pessimism, indicator show optimism over new governance seem to be fading.

Reformist government has introduced tax cut for businesses in tune of 5% over the next four years, however charging consumers higher service tax of 1.64% from this year and plans to increase the tax burden by another 2% over the coming months.

Moreover latest PMI report showed that manufacturing output growth has reached four month high and output is expanding for consecutive 19 months. However the recovery has been jobless so far.

• Optimism on current business condition has improved since Narendra Modi led new government came to power last year but business confidence index dropped 2.5% in May to 62.3, which is a lower score than new government came to power.

The new government risk lowering consumption and even depress the trend with higher tax imposed.

India's benchmark stock index is down about 2.4% today, currently trading at 8236, likely to go down further with 8000 mark providing psychological support.