Will the Indian consumer justify our sales optimism this season?

livemint.com:

GST) mop-up. As this is a consumption-based tax, if its collections are increasing, it suggests higher consumption. Growth in these first 6 months has been around 11%, which comes on top of 32% growth (which was a blip because of the 2021 covid lockdown).

However, if consumer goods sales are not growing quite as rapidly, then it is possible GST collections are high because of inflation (which has been high this year) and increased tax compliance (which is clearly evident). Hence, the picture appears to be fuzzy on consumption trends so far. On the other side, red flags have been raised.

The first one is inflation. This has averaged 6.3% in the last three years and 5.5% in the current year, which spells a cumulative rise in the cost-of-living of almost 25%. Retail prices have risen relentlessly.

Higher inflation lowers household spending power, and higher apparent consumption outlays have resulted in a decline in household financial savings. This is from Reserve Bank of India data, which showed that the financial savings of households came down to 10.9% of GDP in 2022-23 from 11.1% in 2021-22 and 15.4% in 2020-21. The second is the pent-up demand phenomenon that provided an impetus in the last two years but could be getting exhausted now.

After covid lockdowns, people went out of their way to spend money in a burst of ‘revenge spending.’ This cycle lasted two years, for sure. In 2021-22, it was manufacturing that got a boost, as households went out shopping in a big way. Crowds at shopping centres were witnessed across the country.

In 2022-23, it was manifested in services, with people travelling to various destinations. Dining out also gained frequency, resulting in crowded restaurants and hotels. The hospitality