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Does India Have A Consumer Slowdown? It’s Complicated.

Top consumer industry executives say they’re seeing stagnating demand, but recent government data has a rosier outlook. Kumar Rajagopalan explains the complex factors at play.

By The Core Team
New Update

As 2022 concluded, India’s retailers were a happy lot. It had been a watershed year for the organised retail sector, as it grew 34% year on year in FY23 per data from the Retailers Association of India, beating not just the pandemic blues but also pre-pandemic figures. It looked like consumption was back in the front seat, leading India back to the blazing growth rate it aspired for. 

It may have been a premature celebration. 

“I think everybody understood that 2022 was a super year. And they were expecting growth to be at 10-11%. But the growth was happening only at around 5-7%. But it's still growth”, Kumar Rajagopalan, chief executive officer of the Retailers Association of India (RAI) told The Core. While organised retail grew at a decent pace between the middle of 2022 and 2023, that growth rate fell in the second half of last year.  “I think it is also because all of us expected too much,” Rajagopalan said.

The problem has dogged India into the new year. In January 2024, the industry again saw a lacklustre growth of 4%, which was concentrated in the food and grocery and jewellery segments which grew by 9% each while consumer durables and information technology products saw negative growth of 1%, according to data from RAI.

Where Is The Value? 

Chiefs of India’s biggest FMCG companies have recently called out stagnating rural demand. Yet, this week’s Household Consumption Expenditure Survey 2022-23 shows a more optimistic state of affairs. Data from the survey shows in the last 10 years, monthly consumption expenditure in rural homes rose more than 1.6x while urban households spent 1.4x more in the same time period.

Yet, a Reuters survey found that of the 50 families interviewed in rural India, 85% reported stagnant or lower incomes compared to the years before the pandemic.

What explains the dichotomy? Rajagopalan argued that of the 30-40% growth that retailers saw in 2022, 10-12% was inflation-led. This meant that the lower income groups were not participating in this larger growth story, since they had not seen a big increase in their own income levels.

“I think this is reflecting on the value brands, and various segments have value in the sense that people who are at the bottom of the pyramid are not able to buy in quantities when it comes to value items,” he said. 

Yet, he added, there were pockets of growth. In ‘value’ retail, where better quality, branded clothes that are cheaply available, drove sales among lower income groups. “Customers are suddenly finding that even if they were not the kind who would otherwise buy branded products, they are now wanting to go and buy a branded item or a fashionable item which aspirationally is much more appealing to them,” he said. 

Some of this consumer behaviour is reflected in the Household Consumption Expenditure survey as well. 

When compared with 2011-12 numbers, rural expenditure on clothing and bedding dropped only marginally from 5.99% of total expenditure in 2011-12 to 5.24% in 2022-23. Given the dramatic increase in overall consumer household spending, it’s a sure sign that rural homes are spending much more money on discretionary goods, including clothes and electronics. 

Fuelled by the festive season and easily available consumer financing options such as zero-cost EMIs, electronics and consumer durables flew off the shelves in the festive season last year, Rajagopalan said. But the risks to this growth were already present: 70% of these purchases were fuelled by some form of short-term consumer finance, Rajagopalan added. 

Sure enough, the next month, consumer durable sales fell 1% year on year.
“In the month of January, there is not so much that's left out for them to really sell,” Rajagopalan said. “Also, there were no big launches of any great items all across multiple categories. So they've kind of got muted in the month of January.”

Trying Times

So, is there a slowdown in India’s consumer economy? While the debate on the differing sets of numbers rages on, it’s clear retailers shouldn’t get carried away by sudden spurts of growth. Electronic goods have already entered a slowdown. Now, fashion may also become a victim of optimism. 

“In garments, if somebody is expecting a 10% growth, and they have landed up into a 5% growth, that could actually mean that they are overstocked by 15 to 20%,” Rajagopalan explained. “And therefore they lead up into having the wrong stock and the wrong time and it takes more time to recover.”

The shocks of the pandemic may be behind us, but structural issues in India’s consumer economy, the primary engine of our growth, remain a puzzle. Without clarity, retailers may be forced to remain watchful and agile or risk undoing good months of business. In the absence of answers, this may become the new reality of India’s retail sector. 


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