Change in demand

• India’s 8.2% GDP growth in 2023-24 was impacted by a weak monsoon and a slowdown in the farm sector.
• Private consumption spends rose at less than half the economy’s pace, with a 4% growth in private final consumption expenditure (PFCE) being the weakest since 2002-03.
• The farm sector’s rain issues and a K-shaped consumption pattern were some of the factors contributing to this decline.
• A normal monsoon is expected to help the farm sector and rural demand rebound, boost overall consumption, and stimulate industrial capacity utilization rates.
• The first quarter saw PFCE rising at a seven-quarter high of 7.4%, outpacing the 6.8% GDP increase.
• However, urban demand is beginning to show signs of fatigue, with high interest rates and a drop in urban buyer confidence levels.
• The Finance Ministry has noted a dip in passenger vehicle sales as a barometer of stuttering urban demand.
• The ability of urban Indians to create room for discretionary spends through the festive season and beyond is critical for growth and the private investment cycle.