Processed and ready-to-eat food has steadily displaced fresh, farm-sourced produce
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The economy is undergoing a quiet but consequential transformation, thriving on the famous John Maynard Keynes’s saying, “in the long run we are all dead”. As economic agents pursue means of short-termism for ends of consumerism, behavioural patterns across savings, housing, consumption, and mobility are shifting in ways that defy traditional economic assumptions. With Artificial Intelligence shortening the short run, policymakers face an increasingly complex landscape. Below, we examine some of the most significant of these trends.Trends in savings, investmentsConventionally, savers are drawn by returns including interest, dividends, or capital gains. Yet this calculus is breaking down in surprising ways. During Covid-19, households prioritised liquid assets over yield-seeking instruments to manage medical uncertainty. Today, a different anomaly is visible: investors are withdrawing money from well-performing funds in economies with strong macroeconomic fundamentals, a clear departure from rational expectations.Perhaps most counter-intuitive is the relationship between interest rates and saving. A higher rate does not automatically increase saving if a household is targeting a fixed corpus, diverting funds for consumerism. Suppose the interest rate is now 4 per cent, and the person is saving ₹1,00,000 per year. Now, let the interest rate rise to 8 per cent and with such a high interest rate, the individual needs to save less to provide the given ₹1 crore per year during retirement, possibly saving only about ₹65,000 a year. A rate rise, paradoxically, can reduce saving. These income effects complicate standard monetary transmission and deserve greater policy attention.Housing, real estate sectorThe housing sector tells a similar story of shifting preferences. For decades, flat ownership was considered the gold standard of investment, a perception further reinforced when RERA brought regulatory clarity and investor confidence to the market. Yet the younger generation is increasingly choosing rented accommodation over ownership, driven by job mobility, maintenance concerns, and the relative attractiveness of other investment avenues. The ripple effect is notable: rental yields are rising, and developers who once built exclusively to sell are now investing in multi-storey rental stock, a structural shift in how real estate functions as an asset class.Lifestyle, consumption patternsLifestyle choices, too, are diverging from textbook assumptions. A growing preference for single-hood and child-free living challenges the life cycle income hypothesis — the classical view that individuals save in their middle years to support family and old age. Today’s consumer is more likely to optimise for present comfort, with old-age homes replacing joint families as the default retirement plan. Behavioural economics offers an important insight here: the pain of a sharp fall in consumption outweighs the pleasure of an equivalent increase. This asymmetry nudges households to maintain precautionary buffers — yet the same impatience that makes people prefer spending today over saving for tomorrow can undermine this buffer. Declining birth rates and smaller family structures will only intensify these dynamics over time.Food habits mirror this broader shift as we enter the age of supplements to gather complements. Processed and ready-to-eat food has steadily displaced fresh, farm-sourced produce as reflected in HCES 2023-24 data, driven by time pressure and convenience. The health consequences are already evident: rising incidence of diabetes, stroke, and lifestyle disorders among younger cohorts, accompanied by a surge in healthcare spending and insurance uptake. Sedentary work further compounds the problem. Beyond individual wellbeing, this trajectory has systemic implications: falling demand for raw agricultural produce threatens the livelihoods of those directly employed in farming, a sector that still employs a substantial share of India’s workforce.Public transport scenarioIndia’s transport behavioural pattern reflects its developmental stage. Unlike mature economies where public transit commands strong ridership, Indian households are rapidly gravitating towards private vehicle ownership, enabled by improved road infrastructure and the convenience it affords. The consequences are multi-dimensional: declining revenue viability for public transport operators, labour displacement, urban congestion, and significant environmental externalities at the cost of few additional engineers and individual drivers. The best example is Bengaluru city, though metro is operational there for quite some time. Exceptional ones are Delhi metro which has excellent coverage earning carbon credits too. The lesson is clear: infrastructure alone is insufficient; shifting perception and behaviour requires deliberate policy design.Need of the hourThe trends discussed here are by no means exhaustive. Many of the trends outlined above can be addressed through behavioural economics tools such nudge theory, default choices, and targeted fiscal instruments. But some are genuinely novel, without historical analogues, and will require innovative methodologies rather than off-the-shelf prescriptions. As AI embeds itself more deeply into economic life, it will continue generating new behavioural patterns, more personalised, more irrational, certainly more short run oriented and many without historical precedent. This will demand fresh analytical frameworks, bringing together domain professionals, trained practitioners, and technologists in the room where decisions are made for new age economic agents.Banka and Karthikeyan serve as Deputy Director and Director, respectively, at Government of India. Views are personalPublished on July 28, 2026
