The MNI India Consumer Sentiment Indicator fell to 118.5 in March from 121.2 in February, the lowest level since September 2013 when the economy was mired in a currency crisis.
"Tax measures announced in the (union) budget may well have dented sentiment. A hike in the service tax will make going to restaurants, beauty salons, theatres, amusement parks as well as air travel and phone services more expensive. The fall in sentiment also came inspite of the early March rate cut by the central bank which came early in our survey period," a statement from MNI Indicators said.
As per the finding, "all five components of the Consumer Indicator" declined in March, led by a fall in the buying conditions in the durables sector.
"Lower levels of inflation and interest rates are seemingly not convincing consumers to shell out on big-ticket items. Both measures of personal finances, current and expected, declined in March with the latter leading the decline and falling to the lowest since September 2013," it said.
"While overall consumer sentiment remains above the 100 break-even level, meaning that optimists outnumber pessimists, it still lies below the series average of 123.1 and was down 5.8 percent on the year."
It said the union budget at the start of the month failed to increase optimism that the new government will put in place policies to tackle India's economic issues over the long-term.
"The March survey was disappointing with consumer sentiment resuming its downward trend. Consumers have seemingly reacted negatively to the announcement of the service tax hike in the budget and have also become more pessimistic about the long-term economic outlook," chief economist at the company Philip Uglow said.
"While the Reserve Bank of India chose to leave interest rates unchanged at its April meeting, our survey evidence from both consumers and businesses suggests downside risks to growth are increasing. On balance we expect the central bank to ease monetary policy further over the coming months", he added.