Household spending may remain low but rural and luxury spending will improve in FY25
May 11, 2024
New Delhi [India], May 11 : India's household spending is expected to remain low in the next fiscal year FY25, says a report by UBS called 'India Economic Perspectives'.
The report highlights that the growth in what households spend on goods and services is predicted to be quite small, only around 4-5 per cent more than the previous year. This is way less compared to the strong 6.5-7 per cent increase we saw each year from 2011 to 2020.
The report points out a few reasons why household spending might not bounce back strongly. One reason is that people living in cities might not spend as much as before. That's because companies are not increasing wages as much as they used to, and people are not borrowing as much money for things other than buying homes.
The report states that banks are also being more careful about lending money. But while spending might not increase much overall, some parts of society are still likely to keep buying expensive things.
According to the report, wealthier people are expected to continue spending like before. On the other hand, spending in rural areas might go up a bit.
Recently the IMD (India Meteorological Department) predicted an above-normal monsoon and the rural demand may pick up if farming production increases on account of a good monsoon.
The rural demand may also pick up if the government allows more farming products to be sold abroad, and if there are more projects to build things like roads and buildings, which create jobs.
Looking at recent history, the report notes that household spending hasn't been growing much for the past couple of years.
The recent government data of National Accounts Statistics 2024 by the Ministry of Statistics and Programme Implementation, shows that India's net financial saving of households is reducing continuously, it has declined to Rs 14.16 lakh crore in Fy 22-23 from Rs 17.12 lakh crore in FY21-22. The household savings peaked during the FY20-21 AT Rs 23.29 lakh crore.
When families save less money, it means they're not putting as much cash into the economy by buying things. And if people aren't buying as much, it can slow down the country's economic growth. So, with savings going down, it's likely that household spending won't pick up much soon. This could mean a bumpy road ahead for India's economy.
