Consumption slowdown is temporary because post-pandemic economic recovery across classes is still uneven. Spending will soon be powered by a rapidly growing middle class
Worries about India’s consumption growth slowing down are overdone. But it’s true that spending currently is very skewed across classes. Let’s look at various data sets to understand this. The first advance estimates of GDP for the current fiscal, 2022-23 (FY23) show private final consumption expenditure (PFCE), a proxy for household consumption, is expected to rise in absolute terms to Rs 164 trillion from Rs 143 trillion in FY22 and Rs 121 trillion in FY21. The 7.7% growth in PFCE in FY23 is on expected lines.
Lopsided recovery
Currently, consumption is highly skewed in favour of middle classes and the rich. However, results from PRICE’s ICE 360 Surveys (2016, 2021 and 2023) showed that trickledown of growth is already happening – for instance the share of the bottom 20% population in total household disposable income was about 6.5% in pre-Covid, down to 3% during Covid and again up to 4.5% now.
Lopsided recovery
Currently, consumption is highly skewed in favour of middle classes and the rich. However, results from PRICE’s ICE 360 Surveys (2016, 2021 and 2023) showed that trickledown of growth is already happening – for instance the share of the bottom 20% population in total household disposable income was about 6.5% in pre-Covid, down to 3% during Covid and again up to 4.5% now.