Slowdown? Here’s what rich Indians are spending on

What are large companies saying about a slowdown?

Maruti-Suzuki, India’s largest carmaker, told investors last month that demand for cars remained “muted” and that it was planning higher discounts to push sales. It is also pinning hopes on sales of premium cars in rural areas, as is Hindustan Unilever, the country’s largest mass consumer packaged goods firm. HUL said that growth in big cities was “trending down”, lagging smaller cities and rural India. Biscuits-maker Britannia said the consumer slowdown was highest in Indian metros. Meanwhile, personal care and foods manufacturer Marico told investors it will rely on higher prices, shift to online sales, and a gradual rural recovery for growth.

Are rich Indians spending on ‘new-age’ brands instead?

Perhaps not. Legacy consumer firms have been losing their premium, urban customer base to a bevy of VC-backed, online-first consumer brands for some years now. But even new age firms are facing the heat from the slowdown. E-commerce software firm Unicommerce told investors earlier this month that festive season demand has been “soft”, especially after sales ended, while logistics firm Delhivery told investors that “consumption slowdown is real” and so is its impact on e-commerce. Honasa Consumer (Mamaearth), reported a 7% drop in revenue and slipped into losses in the September quarter. Its shares hit lower circuit on Monday.

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So, what are rich, urban Indians consuming?

Luxury goods, travel, pricey essentials, real estate and goods and services related to weddings. Axis Capital estimates more than a third of new real estate projects launched in the December 2024 quarter are priced above ₹2 crore, up from a fifth a year ago. The Confederation of All India Traders estimate 48 lakh weddings will generate business worth ₹6 trillion this wedding season, largely for wedding apparel, jewellery and event planning.

Where else are the rich spending?

Quality health and education, even when they are getting more expensive. High-end schools, with tuition fees upwards of ₹7 lakh a year, are growing rapidly in tier-2 and 3 cities in India. Many of these are affiliated with international education systems such as the International Baccalaureate and the UK’s IGCSE board. Meanwhile, private healthcare is also getting more expensive. Insurance firm ACKO estimated India’s medical inflation stood at 14% (as of 2021) while major health insurers have hiked premiums by 10-15% this year. Health insurance penetration in India remains largely restricted to urban Indian consumers.

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Where does this leave India’s consumer economy?

Private consumption traditionally drives India’s economic growth, accounting for more than half of our gross domestic product (GDP). But, with rising income disparity, rich urban consumers have disproportionately contributed to the consumer economy. Dramatic shifts in their spending patterns can hurt large consumer companies and sections of the industry. However, if rural demand continues to recover, the return of low-priced mass consumption can help make up the shortfall. Companies will have to tweak their product and pricing strategy accordingly, say experts. They may double-down on small packs (such as shampoo sachets) at low prices for rural consumers and further expand their premium offerings to smaller towns.

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