A real estate project in the suburbs of India’s capital made news a few days ago for a rush of buyers, even though the cost of the condominiums on offer was close to a million dollars. All units on sale are said to have been dismantled. For an economy in recovery mode after a severe pandemic, such an event is surprising, even though wealth indices clearly show it made the rich richer. This is even with the optimism we derive from other indicators that mark India as a bright spot, with our output expanding at the fastest pace among all large economies. Cut to Tuesday, however, and our national income data for the last three months of 2022 has raised concerns over a consumer cool-off as Covid-pent-up demand eases. While around 7% headline growth in 2022-23 looks within range, private consumption has weakened. Year-on-year, it grew just 2.1% during the quarter ending December 31, 2022. This was on an increased basis after the delta-wave relief as the 2021 festive season clocked in at 8.8%, but still a letdown—a possible reflection of how uneven our recovery has been. This is a concern. This may affect our ability to catch up with the developed world.
What has been described as a K-shaped recovery, in which one section is in better shape and ready to go worry-free while most households are worse off and stiffer, may be an over-simplification, but it is terrifying. Not off-the-shelf. Mark. This has an impact on private consumption, which makes up over 60% of GDP. And what’s happening with our middle and interested classes is particularly relevant, given the huge role these groups play in driving sales. According to the PRICE survey, middle-income families (those whose 5 lakhs onwards 30 Lakhs) and Aspirational Homes ( 1.25 Lakh onwards 5 lakh) accounted for 48% and 32% of all expenditure in 2020-21, respectively; destitute (under 1.25 Lakh) 3% & Rich (above 30 lakh), 17%, which is disproportionate, but still just 17%. Clearly, any upward financial disparity that leaves out large sections of Indian buyers will go against the prospects of a general consumer boom. And this is what we should see. Without wider exposure, private capital may find fewer gifts in the ‘India Story’ to chase. Post-Covid data is being closely parsed for signs of financial distress, and now that demand has slumped, the retail-offtake scenario in many categories reflects tough times ahead. India’s Covid-relief measures were largely aimed at credit takers and the poor, others were left to fend for themselves, while tax relief in 2023-24 for tax-paying but modest earning households unlikely to be sufficient as a purse-loser.
Many years of sustained, uneven expansion would put our economy at risk of slipping into a middle-income trap, making high-income status an elusive goal even after a quarter century. With many of us left behind, this will mean that many more people will fail to access highly productive jobs, leaving our per capita income well below the country’s ‘Amrit Kaal’ target. The only sure way to avoid this trap is to have a relatively fair origination – one that dazzles the markets at all levels. And this requires human resource development on a much larger scale and cost than has been seen so far. Provision for public health and education is at a low level, we have a large number of unemployed in a workforce that is too young, and a top-level boom alone will not help. We should increase the scope of consumption.
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