Robust Demand of Luxury Goods: On the one hand, where the inflation rate in the country (inflation) remains around 7 percent and unemployment (UnemploymentWhile the huge expenditure on luxury items at the beginning of the festive season is telling a different story. You understand it through an example. India’s per capita income is around $2,000 (Rs 1,50,000). According to the companies that make consumer goods, the demand for such items is highest, whose price is around $ 2,000. On the other hand, if you look at the industrial data of sales of budget phones and motorcycles priced between Rs 7,500-8,000, then it will be known that there has been a weakness in their demand. These items point towards rural demand ie low income people.
Increasing demand for luxury products
Bloomberg quoted Satish NS, Senior Vice President of China’s Haier Group Corp’s Indian arm Quindago as saying that Indian customers are moving towards premium/luxury products. Front load washing machines and double door freezers, which cost around Rs 1,50,000, have higher sales than the lower priced products. That’s why we are focusing more on top end products.
Low earning people who could not reach pre-pandemic level
The low earning people are still on the margins. They have not yet reached the pre-pandemic level in terms of income. According to a Bloomberg report, India depends on private demand for about 60 percent of the growth of the economy. Due to inflation, interest rates have increased and this has affected consumer demand. Abhishek Gupta of Bloomberg Economics says that when the condition of the country’s economy is doing well, then such disparity is hidden from the overall growth.
Spend 30 percent on the purchase of essential items
cost of living (Living CostDue to the increase, the expenditure of the average people has also decreased. According to the data of Banco Santander SA, the people of India spend 30 percent of their total income on the purchase of essential items like food items. In China it is 10 percent. Kamal Nandi, business head of the Appliances Division at Godrej & Boyce Co., told Bloomberg that we don’t see that all categories are making progress compared to pre-pandemic levels. CRISIL’s Chief Economist Dharmakirti Joshi said about the increase in sales of premium products that it is possible. He said that the income of the high-paid people has increased rapidly.
Is this kind of rising demand for premium products good?
Now the question arises, does this boom in demand for premium products indicate a better economic condition? In this regard, Chief Economist of India Ratings and Research Pvt Ltd, Devendra Pant told Bloomberg that such a recovery of the economy in which the major share is from the cities, is worrying. He said that such growth can be stagnant, there is doubt about it.