Reserve Bank of India had said in the beginning of this month in its September 2022 bulletin that aggregate demand was firm and poised to expand further as the festival season set in. “Domestic financial conditions remain supportive of growth impulses,” the RBI had said.

Now India is in the middle of its ‘festival season’ which will culminate with Diwali the festival of light on October 24. However, the festival market is yet to see the festive rise in general demand for all goods. The demand is skewed, more for the goods that are used in urban areas rather than the rural areas, and more for the things that upper middle class and the rich use rather than the lower levels of the middle class or the poor.

The festival season coincides with the beginning of the busy season of the India economy from September, and hence the heightened expectation of revival of the market, pushing up demand, and speeding up economic recovery. However, the present market conditions go against such expectations.
With dashed hopes due to a range of reasons from inflation to low or no earning, some 35 per cent of the people have not even panned to spend anything at all during this festival season, according to LocalCircles’ survey. The rest 65 per cent have planned not to spend more than Rs 10,000 which is even lower than Rs 15,000 during the pandemic period of 2020. The overall festive spending this year is expected to register a shortfall of $37 billion compared to the figure of 2019.

Demand for luxury products is high, or for the goods that tend to be used as luxurious. It exposes the rising inequality in India, where common people are not able to do even festival purchases. This is a great hurdle in the way of economic recovery, since India’s real growth is dependent on rise in private demand up to 60 per cent. Government demand constitute only about 40 per cent of the GDP, and it is not sufficient to overcome the Demand crisis that India has been facing for last several years.

The Union government and the RBI had been pinning their hopes on the encouraging GDP growth during the first quarter April-June 2022 that surged to 13.5 per cent, though it was less than 16 per cent of their earlier expectations. However, the growth did not help improve the joblessness among the people, and unemployment rate rose to 8.28 per cent in August. Obviously, the common people, ie individuals with low income, don’t have enough money to purchase, and hence there is not much demand of the goods they use.

The individuals with low incomes are those who earn anything between $2.01 and $10 daily, who make up 116 crore out of about 140 crore population of India. Additionally, it was only in April 2022, the World Bank had pegged the poverty at 10 per cent of the population, which is about 14 crore. Thus India has only 10 crore people who are earning over $10 a day, and their income are on the rise in PM Modi’s regime since 2014, due to the policies adopted by the Union Government. The rising wealth of these 10 crore people, as being show cased as “Rising India” whose aggregate income overshadows the poverty and inequality.

However, the market cannot conceal the fact. Demand is skewed and warning signs of widening inequality is emanating from the current market. Consumer goods makers are reporting high demand for luxury goods and the rich consumers are even ready to pay even premium, because they have enough money, while the budget items or low-end products for the middle class and the poor, and the rural community are showing weaker demand.

The price rise and inflation has adversely impacted the purchasing power of about 130 crore of the people of the country. Only about 40 crore workforce are in jobs, and their wages have been reduced on account of inflation which is hovering above 7 per cent above the RBI’s tolerance level of 6 per cent for the last eight months. All these low-income earners are staying on the sidelines of the current market, which is perceivable everywhere in the country.

It is indeed a worrying development for the economy. The dampening of consumer demand among the common people would create a new consumption crisis in the country which in turn adversely impact the production and supply chain. Rising prices and inflation, unemployment, and the cost of living crisis is compelling the people to cut their expenditure on the good that is not bare necessities for them. They are even cutting their expenditure on bare necessities even on food.

India’s economic recovery largely hinges on demand from both urban and rural market, and the rich and the common people. In absence of such market condition, the economic recovery shown in the first quarter of the current financial years is not sustainable.

Moreover, concealing this frightening reality on the ground level by aggregated growth figures of the GDP, would ultimately ruin the socio-economic condition of the country.

The Indian economy cannot thrive or survive on rising income of only 2 million high-income, 16 million upper-middle income, and 66 million middle-income population of the country. Adopting policies in favour of these people at the cost of 1162 million low-income and 134 million poor is absolutely unethical and unwise.

The growth figures provided by the government and the market figures tell the two opposite stories – the first concealing the rising inequality and the second exposing it. India is moving on a dangerous and contrasting path of wealth creation for a few and destitution for majority.