With some of the leading FMCG companies raising a red flag on demand conditions in the second half of the year, there is some concern on the growth path of the economy for FY25. This is understandable as any projection of high growth was premised on a sharp recovery in consumption. As the IMD has indicated that monsoon is above normal and well spread, it was logically assumed that the cog in the wheel, i.e. rural consumption would turn positive. This is the basis for being more sanguine about Q3 of the year as the period coincides with the post-harvest cum festival season.

The issue which has been flagged is urban consumption which does not appear to be in the take-off mould. In the last couple of years the picture was fogged to an extent by the pent-up demand phenomenon where there was an upsurge in spending. While the lower end products did not quite see the same traction it did not matter as the sales of higher priced goods were up. This was the phenomenon of premium products selling well in the market. The higher income groups have been impervious to any external effects; and post covid have been on an upward spending spree. This has manifested in buying more high-end goods. In fact, the number of BMWs, Audis and Mercedes cars on the roads has increased and reflect the wealth of this class. But lower down the pecking order, things have been different.

Quite clearly when segmenting society in terms of targeting goods and services, it is no longer a dualistic approach of rural and urban. There is also an income group which comes into the picture where there are three........

© Free Press Journal