'Gap between haves and havenots is narrowing"

Tanvee Gupta Jain, Chief India Economist of UBS Securities India, on India's consumption story and the risks to the Indian economy

- SIDDHARTH ZARABI

IN A RECENT REPORT, UBS has raised concerns about a fatigue in urban consumption in India. In an interview with Business Today, UBS Securities India's Chief India Economist Tanvee Gupta Jain talks about trends in consumption and the implications for the Indian economy. Edited excerpts:

First, let's take up the curious case, as you call it, of India's K-shaped consumption pattern. Take us through what this is all about.

Since the pandemic, we have seen a K-shaped consumption pattern. This is not to say that India was a very equal society earlier; we always had that gap between the haves and the have-nots, but that gap widened post-pandemic. So anything that was in the mass-market, entry-level segment was not doing that well, but for anything that was premium or luxury, the demand was very strong. Even in luxury cars, the demand was holding up, whereas aggregate passenger car sales were muted. But it looks like the gap could narrow in FY25. In the premium or affluent segment, consumption is clearly showing signs of fatigue because urban wage growth, which was almost 12-14% post-pandemic, has gone back to single-digit levels. Second, household debt service obligations for the higher income segment have gone upcredit growth has moved from 6% to almost as high as 18% at the peak. It has only now slowed again to around 14.5%. Lastly, household savings could have picked up marginally in FY25.