India Why are I getting richer and richer? At the same time, there is no major change in the lives of the poor. After all, what is the reason behind this? Now the answer to this question has been found. Swiss brokerage firm UBS India on Tuesday said there is a ‘critical divergence’ in India’s consumption scenario and its K-SEP trend is likely to continue in the near future. In the K-step era, one group of the society becomes richer while the group at the bottom does not benefit as much from this growth. That’s why the wealth of the country’s rich is increasing. At the same time, the lower income group is not getting its benefit.
There is a lot of contradiction in the way of spending
UBS India economist Tanvi Gupta Jain said in a report that India’s consumption story reflects a significant divide that is being driven by a struggling economy. But there are stark contradictions in spending patterns, he said, adding, “There remains a gap between the affluent and broad-based domestic demand. This has been fueled by factors such as income inequality, increased access to consumer credit and decline in household savings.” The brokerage firm estimates that household consumption growth will ‘slow’ to four-five per cent in FY 2024-25. Will remain. This is less than the trend seen in previous years.
Household consumption almost doubled
Experts have been raising concerns over a K-shaped recovery as the inequality gap in the country widens following the COVID-19 pandemic. However, some economists do not agree with this and have also called the pandemic ‘levelling’ to reduce inequalities. According to the UBS report, household consumption in India has almost doubled in the last decade, increasing by 7.2 percent on an annual basis to $ 2.1 trillion by 2023. However, in the last two years, household consumption has increased at a slow pace and only the demand from the rich class has seen a significant increase.
Sales of expensive houses and expensive vehicles increased
Terming the revival in consumption growth as ‘uneven’, the brokerage firm said sales of premium cars, homes priced above Rs 1 crore, smartphones priced above Rs 25,000 have grown rapidly. In contrast, sales of entry-level and mass-market products have remained slow after the pandemic. UBS India attributed this divide in consumption to factors such as questionable income sustainability of people at the bottom, limited fiscal support for weaker sections and reduced household savings due to low incomes.
Continued since Corona
The brokerage firm said the consumption trend of ‘K-SEP’ continues even after the pandemic and the urban economy is still performing better than the rural economy. Despite this consumption divide, India is on track to become the world’s third largest consumer market by 2026.
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