ILLUSIONS Of GROWTH
Outlook Business|March 2024
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
ILLUSIONS Of GROWTH

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.

This story is from the March 2024 edition of Outlook Business.

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This story is from the March 2024 edition of Outlook Business.

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