RBI Projects Accelerated Household Consumption Growth in FY 2024-25

India is set for a surge in household consumption in Q2 FY 2024-25, driven by easing inflation and a revival in rural demand, according to the RBI. Increased hiring in e-commerce and logistics sectors ahead of the festive season and rising disposable incomes are key contributing factors.

The Reserve Bank of India's recent bulletin suggests accelerated household consumption in India during the second quarter of FY 2024-25. Easing headline inflation and a significant rise in rural demand are expected to drive this growth.

The central bank noted that declining inflation in food and essential goods is boosting consumers' disposable incomes, thereby enhancing overall spending power. A revival in rural demand, especially in fast-moving consumer goods (FMCG) such as healthy lifestyle products, further supports this trend.

This trend mirrors rising longevity and affluence, with companies targeting premium products for younger consumers. Additionally, the demand for FMCG is rising among older customers due to increased affluence.

Increased hiring activities in e-commerce and logistics firms, particularly before the festive season, are propelling this demand surge. These companies are expanding their workforce beyond metropolitan areas, reaching Tier 2 and Tier 3 cities.

E-commerce companies are gearing up for higher online sales, leading to a rise in logistics hiring for warehousing, transportation, and delivery services. Telecom and internet service providers are also expected to contribute significantly to the employment growth.

Reports from TeamLease Services indicate that 62% of companies in these sectors plan to expand their workforce by the end of the year, further stimulating household income and spending. The RBI acknowledged that the agricultural sector was sluggish in the first quarter, but this was offset by robust performance in the manufacturing and services sectors.

(With inputs from agencies.)