Sales from the start of Navratri to Dussehra are already more than that of the entire festive season last year.
Private consumption accounts for close to 60% of India’s GDP.
So, buoyant sales are very important for overall economic growth. Available data seem to indicate that premiumisation is rapidly taking hold across a whole swathe of products, from mobiles to automobiles.
Thus, expensive cars are doing better than entry-level ones, and smartphones priced over Rs 15,000 are outselling cheaper ones.
RBI’s September Consumer Confidence Survey shines a bright light on these trends and tendencies. Both current and forward-looking expectations – the latter, consumer perceptions a year from now – are better than the previous quarter and, indeed, are at 4-year highs. But a look at the granular level reveals a nuanced picture. More people express pessimism than optimism about their economic situation, and their individual prospects for income and employment, though the direction of change is positive compared to the previous round.
Worryingly, as many as 38.2% of respondents plan to cut spending on non-essentials, compared to 23.4% who plan to spend more, a dip from 36.5% and 26.6%, respectively, in the preceding July round.
The periodic labour force survey released this month shows much sharper rises in income at the upper end of the salary levels compared to the lower deciles. All these explain the slow growth in sales of entry-level items and brands’ emphasis on premiumisation.
This dichotomy was visible in last week’s results of HUL, a bellwether for the FMCG sector, as the company reported the slowest volume growth in six quarters, opting to hold prices and focus on profitability in the wake of fierce competition from smaller rivals.
The future of premiumisation depends on the growth in middle-class jobs, which could slow in the short term because of the headwinds being experienced by the tech industry.
