Menon said urban consumption has slowed while rural demand, although relatively stronger, faces growing risks from higher debt and an uneven monsoon. He expects these pressures to weigh on consumer spending in the coming months, particularly in the fast-moving consumer goods (FMCG) sector.
“The headline story is that Indian consumers are not retreating, but they’re extremely cautious about the wallet,” Menon said.
According to the survey, 84% of households said they are either struggling to manage their budgets or finding it harder than before, compared with 72% a year ago. Only 16% of consumers now say they are living comfortably, down from 28% last year.
While overall household expenditure continues to grow, the pace has slowed sharply.
Menon noted that household spending growth has nearly halved to around 7% from 13-14% a year ago. The report also highlights a widening gap between urban and rural consumption, with grocery spending accounting for a smaller share of urban household budgets as consumers allocate more money towards discretionary purchases, Equated Monthly Instalments (EMIs), education and healthcare.
Rural demand faces new challenges
Despite rural consumption outperforming urban markets, Menon warned that rising debt obligations and weaker monsoon conditions could affect spending going forward.
He said rural consumers are increasingly financing purchases of consumer durables through loans, resulting in higher EMI commitments.
“The bigger worry is that… this time monsoon was very erratic,” Menon said, adding that weaker rainfall could have a prolonged impact on rural incomes and FMCG demand.
FMCG volume growth slows
Worldpanel’s data also points to a moderation in FMCG demand.
According to Menon, FMCG volume growth has slowed from 5.2% during the April-June period to 4.8% and further to 4.1% in the latest June-August period.
“Consumers are feeling the heat of it, and that is now reflecting in purchases as well,” he said.
Premiumisation continues despite pressure
Even as household budgets remain under strain, Menon believes premiumisation remains intact, although the pace of growth has moderated.
He said affluent consumers remain largely insulated from macroeconomic pressures, while value-conscious consumers are increasingly accessing premium products through smaller pack sizes.
According to Menon, premiumisation is slowing down. It’s not declining, with brands continuing to benefit from premium offerings despite the broader slowdown in consumption.
For the full interview, watch the accompanying video
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