Shedding Light on Consumer Sentiments: Evidence from India

This paper shows how location-based indicators can influence consumer confidence in India. We capture local economic activity using city-wise night-time luminosity (NTL) data. Using data on unit-level observations on consumer confidence from the Consumer Confidence Survey (CCS) by the Reserve Bank of India from June 2016 to November 2021, we find that night-time luminosity positively impacts the perception and future outlook of Indian households. Our results are robust even after controlling for state-wise urban inflation. We also find the dynamic effect of NTL on consumer sentiments. Finally, we extend our study to analyze the impact of NTL on several individual components of household sentiments from the RBI survey, such as household perception and outlook on household income, spending, employment, and general price levels. Overall, our results provide fascinating insights about using NTL as a measure of local economic indicators and its implications on households' sentiment indicators.