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Private consumption picks up by 12.4 pc in India as discretionary spend rises

Even in real terms, private consumption has grown by 7.4 per cent, outpacing GDP growth, according to the Bank of Baroda (BoB) report.

Private consumption picks up by 12.4 pc in India as discretionary spend rises

Representation image (File photo)

A continued momentum in discretionary spending of consumers, coupled with favourable price effect, helped private final consumption expenditure (PFCE) pick up by 12.4 per cent in India in the April-June quarter this fiscal, as against 8.1 per cent in Q1 FY24, a report showed on Wednesday.

Even in real terms, private consumption has grown by 7.4 per cent, outpacing GDP growth, according to the Bank of Baroda (BoB) report.

“The disaggregated production (IIP) and price (CPI) data showed that demand for durable goods is on a strong footing. This is further supported by moderation in prices,” the report mentioned.

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Among major segments, sales of AC and refrigerators posted a strong double-digit number.

The quarter also coincided with worsening heatwave conditions and a warmer summer. AC sales picked up by 37.8 per cent in Q1 FY25 compared to -17.5 per cent in the same period of the previous year.

“Other white goods such as TV, mobile phone sales, have also picked up, which generally do not show the seasonal trend in Q1. A softer inflation rate for these items has also contributed to an increasing demand for these items,” the report mentioned.

Inflation moderated for all these durable goods items, except AC. Notably, production numbers also got a boost from a favourable low base.

The report further stated that certain segments of non-durables witnessed improvement in Q1.

These include items of daily consumption such as detergent powder, shampoo and instant food, etc. However, some items are trailing behind.

“This may be due to a shift in consumption behaviour. For example, sales of biscuits and bread have been witnessing a decline for quite a few episodes. This may be on account of consumers moving to healthier bites,” said the report.

For example, roasted and salted cashews during the same period have witnessed an increase of 43.1 per cent, compared to -19.8 per cent in the same period of the previous year.

Going forward, the green shoot of rural demand is already visible. The monsoon is progressing well, and so is sowing.

“Food inflation shows a downward correction in Aug, which will be reflected in the coming prints. This coupled with the early arrival of festivals will further provide consumption demand the desired impetus,” the report noted.

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