Why Urban India's Woes Hurting Growth

The Indian urban consumer is struggling.

- RAJAS KELKAR

Several indicators show that those in urban India are saving money and not spending. That happens when you are struggling with your income or face uncertainty. A survey by Kantar, a global research firm, showed growth in consumer companies by large established companies (HUL, Marico, Godrej, Dabur), which were growing relatively slower than lesser-known companies or brands. The unorganized sector grew even faster. That is a phenomenon called downtrading.

The consumer chooses cheaper products or services than before to manage spending. That activity is an indicator of a wage growth slowdown. That does not bode well for companies that rely on largely urban and rural consumption, as two-thirds of India's gross domestic product is led by it. Urban consumption means rich, middle-income people in urban areas spend money on food, entertainment, travel, and other discretionary expenditures for comfort.