Lower middle class facing consumption challenge, inflation, low salaries key issue: FICCI President

India’s lower-middle class section is facing a consumption challenge, with rising food inflation reducing people's discretionary spending kitty, and a slow growth of salary increases making matters worse, Harsha Vardhan Agarwal, the new president of the industry body Federation of Indian Chambers of Commerce & Industry (FICCI) said.

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In an interview with Aggam Walia and Soumyarendra Barik, he also spoke about when the private sector may ramp up their capex spendings, and why the industry’s research and development (R&D) budget is low, among other things. Edited excerpts:

Very clearly what we see in the consumption area, the challenge is more at the lower-middle, middle-class area because we have seen even in FMCG, rural is doing better. Premium products have been doing very well post-Covid. It is in this area of lowerand middle-income group where the real challenge is. If you see the average retail purchase, 75 per cent of it is in the food and grocery area and only 25 per centis in discretionary. So, any impact on food inflation has a direct impact on the discretionary spend. We all know food inflation has been a bit high in the past few months and particularly in the areas of vegetable, oil, etc. But going forward, because that’s a concern area for the government also and it is taking a lot of measures, we are hopeful that maybe in the next quarter or so — we are seeing some green shoots also — the inflation rate may come down a little bit. Also, because of people's salaries, it has not been able to keep up with the pace of inflation. | think these two things may be coming back and it will have a positive impact.

The FICCI-Quess Corp report pointed out that while private sector earnings are at an all time high, wages of people have not kept pace. Why is the private sector not compensating its employees commensurately?

| wouldn't say it has not kept pace, because ultimately in the free economy, obviously in such a competitive world where there’s always a dearth of capable people, if a company is paying less, nobody is going to stay with the company, right? And hence, | would say it’s wrong to have that view that the industry is not paying well to the people. If you see, ultimately the people can move around.