There is beaming optimism on festive season, but among the rich
Premium- This theme of the rich getting richer, or the big getting bigger, which is also known as a K-shaped recovery, is being witnessed in various sectors
There were widespread fears that among the economic consequences of the pandemic will be a rise in income equality. And this is playing out now. A recent survey conducted by UBS Securities India Private Ltd showed while affluent consumers are upbeat about festival season spending, those in lower-income groups do not share the optimism.
"Our analysis indicates that while the formal sector appears to have gained market share, the informal economy has suffered through the pandemic which may not have been adequately captured by the survey results," UBS said in a report dated 29 September.
It added that the survey results support the view that the pandemic did not have much adverse impact on income levels of affluent Indian consumers. This survey corresponds to the upper income households who would have largely seen income and employment continuity during the pandemic, said the report.
“The gap between the affluent and lower income groups is expected to widen further, mainly because elevated and sticky inflation has eroded the purchasing power of the latter. Also, employment and income growth trend for this category remains subdued. Since the items of regular consumption have become expensive, it has also impacted the household savings of this class. Consequently, in the a run up to the festive season, we could see consumption of premium products seeing a better traction," said Madan Sabnavis, chief economist, Bank of Baroda.
The third wave of the UBS Evidence Lab India Post-Covid Consumption Outlook Consumer Survey was conducted online in August this year, with 1,500 India consumers. The survey largely relates to the 'higher income' or 'upper-middle income' sections of India's income pyramid on a socio-economic classification and hence is not representative of the larger population, said the UBS report.
This theme of the rich getting richer, or the big getting bigger, which is also known as a K-shaped recovery, is being witnessed in various sectors. For instance, in the real estate sector, luxury housing, which has non-resident Indians and high-net worth individuals as clients, is seeing a revival in sales and rentals. On the other hand, the affordable housing segment is struggling.
An analysis of recent consumption trends by Bank of Baroda (BoB) also showed that items of daily consumption showed a drop in production, both in April-July 2022, as well as compared to pre pandemic levels. Price pressures on these items remain elevated, said the BoB report on 26 September.
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However, bottled water, creams and lotions, liquor, travel goods, aerated drinks, passenger vehicles sales, especially the high-end segment all show momentum in economic activity, added the report.
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