Our economy seems to have gotten even more K-shaped

India's middle class might actually be shrinking while disparities turn more glaring than ever

- RAHUL JACOB

India's 'K-shaped' economy is now so entrenched that news headlines appear to be speaking about two very different countries. Consider two news items. In the first 11 months of last year, imports of luxury watches hit 250 million Swiss francs, up 28% from last year. That article in Mint last week also mentioned a 40-year-old Delhi businessman who spent an initial ₹60 lakh on an obscure Swiss luxury brand timepiece and then customized it for a total cost of ₹1.6 crore. At the other end of the spectrum, pushing through price hikes for tea, coffee and edible oils has meant that fast-moving consumer product companies are projecting low single-digits growth in earnings per share. In the middle, even relatively low-priced international clothing brands are seeing declining footfalls and sluggish sales.

Reserve Bank of India (RBI) surveys for November show that almost 90% of urban households spent more on essential items than they did a year ago, the highest in almost a decade. The growth of India's middle-class has been slowing for several years, but anecdotal evidence, low wage growth and sustained food inflation suggest it may be becoming smaller. Car sales show that inventory of subcompacts is piling up at dealerships. Almost a year ago, Maruti Suzuki chairman R.C. Bhargava underlined that sales of cars priced below ₹10 lakh were struggling while SUVs were motoring along. He added a corollary that had implications for the entire economy: "Unless the lower end of the market grows, there are going to be no feeders into the upper market." Six years ago, I wrote a piece for