Forget Trump for now; India has another growing financial emergency—urban slowdown

Trump and inflation and all that apart, there is a new, real big fear on the horizon for India—is urban growth slowing down?

 

Post-Covid, while there was consternation over the slow pickup of the rural economy of the country, now the shoe seems to be on the other foot. There are way too many indicators to ignore that urban consumption is going down, indicating a deeper morass of job uncertainty and lack of sufficient income growth, coupled with a steep price rise in the years following the pandemic.

 

Monday morning’s reveal of automobile sales figures, reading between the lines, say exactly that—while overall retail sales have declined year-on-year, commercial vehicles, that significant indicator of whether economic and business activity is picking up, continue to register low figures at 0.17 per cent.

 

The figures by the Federation of Automobile Dealers Association (FADA) ironically now show rural areas of the country are better off as far as vehicle sales go. 

 

So, even in categories where there is a little bit of growth, it is distinctly more in rural areas of the country, ranging from two-wheelers (rural growth 8.39 per cent compared to cities and towns showing a growth in sales of just 6.77 per cent) three-wheelers (rural growth at nearly 9 per cent compared to below one per cent for urban areas) and even cars and SUVs (nearly 8 per cent growth in rural compared to around 3 per cent in urban).

 

FADA President C.S. Vigneshwar called the rural growth compared to urban slowdown “a key highlight of the year”. He added, “(This) reminds us just how much factors like unpredictable weather, financing constraints, and shifting consumer sentiment can shape overall demand.”

 

In fact, while sales picked up in March from the low figures registered in February, not only could it be due to financial year-ending buying sprees, nearly 61 per cent of vehicle dealers surveyed by FADA clearly say they expect sales in the coming summer months to be either flat or a de-growth.

 

It is not just vehicle sales. A recent study by Nuvama as quoted by a leading business daily also spoke of urban consumption further slowing down.

 

The report said, “Upper-end consumption may slow further after four years of a strong run.” That won’t be good news to a nation hoping to surmount the export challenges from Trump’s tariffs based on the strength of domestic consumption.

 

The worry already seems palpable in sectors other than automobiles. An electronic TV manufacturer this correspondent spoke to said he was more worried about the slowdown in sales in urban India for TVs and white goods rather than any long-term impact of what Trump’s tariffs would bring.

 

It remains to be seen if finance minister Nirmala Sitharaman’s income tax bonanza of no tax on salaries up to 12 lakh rupees per annum, which kicked in this month, could be a panacea to the growing cityside blues.

Business