Indians are feeling the pinch of rocketing prices, passed on by companies across industries to save their margins from high input costs. As the low-to-mid income generating population largely feels the heat, consumption is seeing a sharp slowdown, and household savings have slumped to a three-decade low.
This broad-based moderation in consumption in recent quarters, coupled with lower household savings, is evidence of a K-shaped economic recovery in India, as inflation continues its uptick despite the Reserve Bank of India’s policy rate hikes.
Nuvama Institutional Equities in a recent report said that overall, post-Covid, economic recovery may be strong in pockets, but it remains weak on the aggregate.
“Domestically, consumption momentum is clearly fading, and capex could follow suit amid slowing prices, rising cost of capital and slowing consumption and exports,” it added.
The consumer price index (CPI) inflation in India touched 6.5 per cent in January, after being 5.72 per cent in December and 5.88 per cent in November last year.
Moreover, India’s inflation has averaged 7.2 per cent YoY in H1FY23, following 5.8 per cent in the preceding two years.
To deal with higher input prices and the rising cost of production, companies across various sectors have been passing on the prices to consumers, who are feeling the heat.
As a result, consumption and savings are taking a hit across India, especially for the lower strata of society.
A recent report by India Ratings said that industrial growth in India is expected to remain tepid because of the K-shaped recovery, which is neither allowing consumption demand to become broad-based nor helping the wage growth, especially of the population belonging to the lower half of the income pyramid.
Read More at https://economictimes.indiatimes.com/news/economy/indicators/sky-high-prices-burn-indians-pockets-drag-savings-to-30-year-low-amid-k-shaped-recovery/articleshow/98445723.cms
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