ILLUSIONS Of GROWTH

Powered by easy credit, a section of Indians is splurging on premium products; at the same time, agricultural wages have stagnated and the share of the self-employed has steadily gone up. Post-pandemic, the Indian economy is going through a lop-sided recovery

- Ayyan Kartik

Priyam Veer Singh, a worker in a restaurant in south Delhi, recently bought a smartphone worth ₹25,000. Not only that, he gifted his wife one too. Like Priyam, Axat Bharadwaj, a Delhi-based techie, too used his credit card to buy a smartphone that cost ₹50,000.

Proliferation of credit cards, easy EMI options, cash back and other rewards are luring the young into splurging on premium products. The Rise of Affluent India, a recent report by investment bank Goldman Sachs, says the consumption of premium goods in India has seen a significant rise in recent years. This trend has been labelled the “premiumisation of the Indian economy” by analysts.

According to the report, premium brands have grown vis-a-vis mass brands. While sales of Royal Enfields have gone north, mass motorcycle brands have shrunk by nearly 20% compared to pre-Covid levels. Similarly, sports-utility vehicle sales have been higher than overall car sales. 

Goldman Sachs says that between 2018–19 and 2022–23, sales of Bata, an affordable footwear brand, grew close to 20% while Metro, which focuses on the premium segment, saw its sales jump by over 70% in the same period. Brands such as Titan in jewellery, Apollo Hospitals in health care, MakeMyTrip in travel and Phoenix Mills in retail, which cater to the top-end of consumer pyramid, recorded strong CAGR—between 12% and 18%—in revenue between financial years 2019 and 2023.

Seen by these metrics, it would seem that the Indian economy is trotting along at a good clip with a growing cohort of affluent Indians. But a deeper dive into the Goldman Sachs report throws up some disturbing numbers. There are more reasons to worry than celebrate.