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.