India’s city dwellers are cutting spending on everything from cookies to fast food as persistently high inflation squeezes middle class budgets, threatening the country’s brisk economic growth.
Slowing urban spending over the past three to four months has not only hurt the earnings of largest consumer goods firms, it has raised questions about the structural nature of India’s long-term economic success.
Since the end of the pandemic, India’s economic growth has been driven in large part by urban consumption, however, that now seems to be changing.
“There is a top end – the people with money are spending like that is going out of style,” Nestle India Chairman Suresh Narayanan said.
“There used to be a middle segment, which used to be the segment that most of us fast moving consumer goods (FMCG) firms used to operate in, which is the middle class of the country, that seems to be shrinking.”
Nestle India, which makes Kit Kats and other well-known goods, reported its first quarterly revenue drop since the COVID-hit June quarter in 2020.
While there is no officially defined income bracket for Indian middle class households, they are broadly estimated to account for a third of India’s 1.4 billion people.
They are considered a key demographic both economically and politically, with middle class frustration seen as a significant factor behind Prime Minister Narendra Modi’s weaker election performance this year.
