From recent consumer trends, word on the ground is that the middle class in India has stepped up their consumption due to the higher retail appetite due to social media trends and fast deliveries by online retailers. However, major players in the street say otherwise when it comes to urban markets, which are a time when more and more premium products are launched each week.
Major fast-moving consumer goods (FMCG) companies—from Nestle to Hindustan Unilever—warned of slow demand in urban markets. This directly contradicted the premium market trends. A Nielsen study found that premium FMCG brands are growing twice as fast as their non-premium peers.
Urban premium spending has also increased due to a shift of the working population to Tier-1 cities post the corporate move to resume office locations, cutting work-from-home roles. This move, which also became expensive to many, cut spending on fast-moving goods. The urban middle class is fighting between aspirational buys and essentials—not spending for essentials regularly and instead pouring money into bigger premium purchases fueled by social media and the need to have cash in hand. This has also created a certain distress among the young urban spenders, driving the overall FMCG markets down.
Will a policy change help?
The IMF forecast for India’s GDP growth is 7 per cent for FY2025 and 6.5 per cent for FY2026. Goldman Sachs’ GDP outlook for FY2025 is just 6.5 per cent, 40 basis points below the general consensus. This also reflects in people’s spending going forward, so a policy change would really help matters. But in India, urban spending is not really a priority.
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The Centre and policymakers do not ideally see consumption of the middle class as a major issue, given that their focus is on the upliftment of the underprivileged. And even if middle-class consumption is put to the fore, it usually lies with local governance, especially given the impending assembly polls in many states.
“State governments are already slipping on their fiscal targets, most likely,” Madhavi Arora, chief economist at Emkay Global, told NDTV. However, local governments focus more on industrial policy rather than consumption.
With the urban middle class, the private FMCG sector is more of an active player that can bring change, cutting costs and leading recovery. However, Suresh Narayanan, CMD of Nestle, opined that the middle class of the country is shrinking. “The ones who are offering reasonable value in the middle segment are finding their fortunes temporarily shrinking,” he told media.