HIGH PRICES SHRANK THE MIDDLE CLASS

IT was not that the warning signals were absent. Analysts have been saying it - that real incomes are shrinking; and consumption is slowing down.

- GURBIR SINGH

But it is when the big stakeholders get hit, it is time for everyone to wake up!

Nestle India experienced its slowest quarterly growth in 8 years when for the second quarter this year it reported a mere 1.4 percent revenue increase year-on-year, and a shrinkage of 1 percent in volume. Articulating the frustration of the FMCG sector, which had taken robust growth at all price points for granted, Nestle MD Suresh Narayanan blamed his woes on the shrinking middle class.

In recent days, Narayanan said: "Premium consumption still continues to be fairly strong, but the middle segment, which used to be the segment that most FMCGs used to operate in, seems to be shrinking."

Buying of cars, another bell weather indicator, has been struggling after runaway growth in the post-Covid years. The Federation of Automobile Dealers Associations (FADA) admitted in August that inventories at factories and dealerships had soared to an all-time high of over 7 lakh units, valued at Rs 73,000 crore. Even the fast-moving SUV segment has been slowing.

SLOWING CONSUMPTION

It is significant the government has finally given up its ostrich-like posture, and is now conceding that indeed there is a crisis of falling consumption. The Ministry of Finance's latest monthly review acknowledged consumer demand was softening. It noted the sharp slowdown in FMCG sales, and said there had been a 2.3 percent contraction in automobile sales. The decline in housing sales and launches in the second quarter also finds mention.