The spoilers that lie ahead: What ails India’s rosy growth story
Rural consumption was hit by inflation and low wage growth, and it was the urban consumers who kept the spending ship afloat. No wonder, the Reserve Bank of India’s consumer confidence index is back at pre-pandemic levels: it is based on an urban survey. But digging deeper into the data made some fault lines apparent.
The survey separates essential and non-essential spending. The trend is directly linked to income: respondents in the lowest income group were pessimistic about future discretionary spending despite the post-pandemic growth revival, even as the highest earners remained buoyantly optimistic. In the middle-income group, optimism took a few months longer to show up than for high-earners.
The pessimism of the poor is more acute in metro cities: last year, an average of 24% of metro city respondents earning less than ₹10,000 a month expected to increase their spending, against 44% of similar non-metro respondents. Intuitively, that makes sense—metro life is more expensive, and offers less family support. The poorest are likely to be in unskilled, informal jobs and, therefore, the most vulnerable to financial shocks.
Three Indian metros—Mumbai, Delhi and Bengaluru—are among the world’s top 50 startup ecosystems, while Chennai, Pune and Telangana are emerging stars (Global Startup Ecosystem Report 2023 by research firm Startup Genome). Yet the RBI survey shows that metros are less optimistic than Tier-II cities about their future economic outlook. One possible reason is the close link between employment prospects and economic optimism.
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