Consumer confidence as an economic indicator of household consumption expenditure is a key driver of economic growth. Consumers tend to increase consumption when they feel confident about the current and future economic situation of the country and their own financial situation. Therefore Consumer Confidence Indices have proven to be reliable indicators of the current and future economic health of market economies.

In order to assess consumer confidence and evaluate how it changes over time, it is important to translate the sentiment of consumers into a numeric index that can be consistently calculated and compared over time. The usefulness of quantifying consumer sentiment is evident in academic economic literature on business cycles. The widespread use of two such monthly indices in the United States, the University of Michigan's Consumer Sentiment Index and the Conference Board's Consumer Confidence Index, has established the credibility and utility of consumer sentiment as a key leading economic indicator.

Objective of the CNBC-TV18 Boston Analytics Consumer Confidence Index
The burgeoning Indian economy has created strong growth opportunities for domestic and international businesses and investors. In order to make effective decisions pertaining to future economic conditions, policymakers, businesses, and investors need an accurate and reliable assessment of consumer confidence in India.

The CNBC-TV18 Boston Analytics Consumer Confidence Index is designed to measure consumer confidence in India on a monthly basis Inspired by the product design and index computation methodologies of consumer sentiment and consumer confidence indices across the world the CNBC-TV18 Boston Analytics Consumer Confidence Index has been carefully designed to reflect the conditions and priorities of the Indian economy by a team led by Dr. Sam Thomas, Ph.D., Director of Research and Development for Boston Analytics. Dr Thomas is also on the faculty of Banking and Finance at the Weatherhead School of Management of Case Western Reserve University in Cleveland, Ohio. The monthly CNBC-TV18 Boston Analytics Consumer Confidence Index is on its way to become the most frequently published consumer confidence index by an independent research organization in India.

Index Architecture and Selected Segments

Data Collection and Index Methodology

The Boston Analytics' Consumer Sentiment Questionnaire is administered monthly to a sample targeting 10,000 respondents across fifteen Indian cities-Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Bangalore, Ahmedabad, Chandigarh, Nagpur, Kochi, Jaipur, Lucknow, Bhubaneswar, Patna, and Vizag. All data are collected via face-to-face interviews.

The sample is stratified based on the socio-economic characteristics of the Indian population in order to ensure sufficient sample sizes for sub-groups of interest.

The index is computed from responses to 25 questions covering various variables known to affect consumer confidence. As a first step towards computing the index, diffusion values (representing the positive bias in responses) are computed for each question. Secondly, each diffusion value is weighted based on the importance of this variable in driving overall perception of economic conditions. Finally, the grand index is computed as the ratio of the weighted sum of the diffusion values of the current survey and the base survey.