Household consumption in India is poised for accelerated growth in the second quarter of FY 2024-25, according to the Reserve Bank of India’s September Bulletin. The apex bank cited easing headline inflation and a significant revival in rural demand as key factors behind the expected surge in household consumption. The decline in inflation, particularly in food and essential goods, is leading to increased disposable income for consumers, thereby boosting their overall spending power. This trend is especially notable in rural areas, where there has been an uptick in purchases of fast-moving consumer goods (FMCG) such as healthy lifestyle products.
RBI highlighted the shift in consumer preferences towards premiumisation for younger consumers and healthy lifestyle products for older consumers. The demand for FMCG is on the rise, driven by companies targeting different demographic groups with specific products tailored to their needs and preferences. Moreover, the increased hiring activities by e-commerce and logistics companies are further boosting household consumption, particularly ahead of the festive season. It is worth noting that hiring activities are expanding beyond metropolitan areas, reaching Tier 2 and Tier 3 cities, indicating a broader-based recovery in the economy.
E-commerce companies are ramping up their workforce in preparation for increased online sales, while logistics hiring is on the rise to support warehousing, transportation, and delivery services. Additionally, the telecom, internet service providers, and related industries are also expected to contribute significantly to the employment surge in the country. Reports from TeamLease Services indicate that about 62 per cent of companies in these sectors plan to expand their workforce by the end of the year, which will further stimulate household income and spending in India.
Despite the sluggishness in the agriculture sector in the first quarter, RBI noted that this was offset by a buoyant manufacturing sector and resilient services industry. The overall economic growth is expected to be driven by increased consumer spending, supported by various factors such as declining inflation, rising disposable income, and targeted marketing strategies by companies. As the festive season approaches, the demand for consumer goods is likely to see a further uptick, fueling economic growth and creating more opportunities for job seekers in various industries across the country.
In conclusion, the Reserve Bank of India’s September Bulletin paints a positive outlook for household consumption in India, driven by a combination of factors such as easing inflation, increased disposable income, and targeted marketing strategies by companies. The revival in rural demand and the shift in consumer preferences towards premiumisation and healthy lifestyle products are further propelling the growth in household consumption. With hiring activities on the rise in key sectors such as e-commerce, logistics, and telecom, the employment scenario is expected to improve, leading to a virtuous cycle of increased household income, spending, and economic growth. As the economy gears up for the festive season, the outlook remains optimistic, pointing towards a brighter future for consumer spending and overall economic recovery in India.
