Rich India v Poor India

Rich Indians are spending like there’s no tomorrow while poor Indians are struggling

Of Homes and Cars

Real estate consultancy Anarock released a report in September 2024. It said that 89% (88 out of 99) of ultra-luxury homes sold in India from 2022 to date were in Mumbai. Each of these homes was priced at ₹40 crore at least. In 2024, 21 out of 25 homes were sold in Mumbai, one each in Delhi and Bengaluru and two in Hyderabad. The sales of all these homes were ₹2,443 crore.

Come down a notch, and it’s not just Mumbai. A JLL report says around 680 residential units worth at least ₹5 crore each were sold in Bengaluru between January and March 2024.

While expensive homes are selling like hot cakes, other housing market segments aren’t doing so great. Listed developers (whose shares you can buy on the stock market) have slowed their investments in affordable homes, saying the segment is now “unviable”. The Anarock report says the share of sales in the affordable housing segment has fallen from 38% pre-COVID to 21% in the first half of 2024. A Moneycontrol report says, “Experts say that, in FY25, this will drop further by at least 5-10%.”

A similar scene is playing out in car and bike sales. An Autocar article says, “At 45,311 units, the cumulative sales of seven luxury carmakers rose 20.5% in FY2024, as per JATO Dynamics India.

“The demand for luxury SUVs surged 34% to 27,489 units. Luxury sedans saw slower growth of 6.5% to 17,569 units.”

The graph below from Autocarpro explains two-wheelers. In FY2019, the total number of vehicles sold was 2.11 crore. In 2024, it’s 1.79 crore. Fewer Indians have the money to buy two-wheelers. For three-wheelers, the corresponding numbers are 7.01 lakh and 6.91 lakh. The one bright spot here is that passenger car sales have increased. In FY2019, 33.7 lakh cars were sold. In FY2024, the number is 42.18 lakh.

Other Economic Indicators

India claims that its GDP is growing rapidly. But in May 2024, Amit Syngle, MD and CEO of Asian Paints said he wasn’t sure about the authenticity of GDP numbers. On May 9, he was answering investor queries, and he said, “Not very sure how GDP numbers are coming. " Syngle pointed out that the numbers being talked about “do not seem to correlate to core sectors.”

“You are correct that the GDP correlation has really gone for a toss, in the current year. I also feel that today, I am not very sure as to how the GDP numbers are coming. You guys are better wizards in terms of really understanding in terms of how those numbers are coming and so on and so forth,” Syngle told an investor.

He said Asian Paints is working on "finding out what the real GDP" is. "So currently, as you rightly said, even we are not kind of really correlating to the GDP in terms of looking at it ... So, we are also looking at ways and means in terms of finding out what is the real GDP."

In a week, Asian Paints said that his comments had been misinterpreted. Asian Paints is India’s largest paint company. When its CEO says GDP numbers don’t line up, it’s worth paying attention to him.

A similar narrative is playing out in food. The country claims that inflation is between 5-7%. But check out any food item in India, and you’ll find that prices have surged in the past year. Salt is up 10%, staple vegetables like onions are up 51%, garlic is up 128%, tomato is up 247%, potato is up 128%, peas 51%, and cabbage is up 13%. All of these data points are taken from an article in The Hindu. The newspaper calculated that the cost of preparing a thali in Maharashtra is now up 52% from 2023.

Recently, the MD of Nestle India echoed the sentiment. He said that India’s middle class is disappearing. This Business Today article says, “Suresh Narayanan, chairman and managing director of Nestlé India, said the market has become polarised, with premium consumption remaining reasonably strong but the middle segment, where most FMCG players used to operate, shrinking.

“There is a top-end, and people with money are spending like that is going out of style. The middle class of the country seems to be shrinking. The ones offering reasonable value in the middle segment are finding their fortunes temporarily shrinking,” Narayanan told reporters in a select media briefing at the company’s plant in Samalkha, Haryana, on Tuesday.”

HUL, Tata Consumer, Pidilite (Fevicol), and United Spirits are all saying the same thing. They all point to one fact: Indians have little money to spend now.

In June 2024, the RBI showed concern about the spike in defaults among people who have taken personal loans of less than ₹50,000. As per The Indian Express, “The RBI report said little more than a half of the borrowers in this segment have three live loans at the time of origination and more than one-third of the borrowers have availed more than three loans in the last six months.”

Please let us know what you think of this newsletter. If you disagree with our analysis, please write back. If we have missed out on something or made wrong claims, please let us know.

Do write to us with any feedback, positive or critical. Like all new initiatives, there is a learning curve. We are especially cognizant that you have chosen to give us your valuable time from the millions of content options out there. Thank you!

Please reply to this email if you want us to cover any topic in particular. Definitely write to us if you want to cover a topic for us.

If you like what we do, please forward this newsletter to your friends and people you love.

If someone you love has sent you this newsletter, please click here and sign up for the newsletter and check out our Instagram page for more.

So long!

Team Reading Room