Big Indian spender, go forth and splurge

India Inc is preparing for a surge in festival consumption on pent-up demand after subdued sales in two years of Covid-related restrictions. Car dispatches are zooming as chip shortages ease with wait periods for popular models stretching well over a year. Mumbai, the country’s most expensive housing market, is setting new records for the number of property registrations. An airplane ticket from Delhi to Mumbai costs half as much again as it did at the beginning of the year. Hotels are full up on revenge tourism. The Big Indian Spender is back in action, shrugging off the odd twinge of discomfort over mounting food and fuel prices, rising credit costs and supply disruptions. This should be heartening news to policymakers trying to nurse a fragile economic recovery.

The resilience of big-ticket consumption in an adverse macroeconomic environment is captured by high-frequency indicators that signal capacity utilisation is improving, peak electricity generation is at a new high, freight haulage is rising, and goods and services tax (GST) revenue is robust. The pandemic has accelerated formalisation of the Indian economy and income redistributed by the health crisis is feeding suppressed demand. A further redistribution is in play as an energy shock moves wealth further away from wage-earners towards profit-earners.

This calls for a bigger role for GoI in ensuring equitable development. But pockets of high growth need a free run to sustain the chugging economic momentum. Consumption at the top of the pyramid is as important as at the bottom. That it is surging of its own accord should not be taken as a default condition. The wealth redistribution that feeds this demand was assisted by accommodative monetary and fiscal policy, and as the policy cycle turns, there could be effects on spending habits in the top decile of the population. More spending must be coaxed out of this segment even as languishing demand at the lower end is aided through income transfers. The Big Indian Spender should be cajoled to go ahead and splurge.


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