The Indian growth story has revolved around strong consumption growth across sectors.Foreign direct investment in select sectors has remained robust, though foreign investors have turned net sellers in the equity markets.Kunal Vora, Head of India Equity Research at BNP Paribas, spoke to businessline about how the adoption of artificial intelligence could disrupt the job market and potentially affect India’s consumption story.
Compared with your previous reports, what are the key changes in affluent consumer consumption?
Our reports in 2023 and 2024 focused on the drivers of strong affluent consumption after the pandemic. At the time, robust hiring, healthy wage growth, easy credit and rising equity markets fuelled demand. We define affluent consumers as households earning over Rs 10 lakh annually. As incomes rose, spending on discretionary categories such as cars, air conditioners and food delivery increased. Strong wage growth in IT and financial services, higher leverage and the equity market rally between 2021 and September 2024 boosted household wealth, driving a boom in consumption and investments. This was reflected in strong growth in passenger vehicle sales, luxury hotel demand and mutual fund inflows.The picture is somewhat different today. While several companies serving affluent consumers have outlined ambitious growth plans for the next four to five years, the key indicators supporting demand have weakened. Employment is the biggest concern. More than half of NSE 500 salary expenditure comes from IT and financial services, and hiring in both sectors has remained subdued for the past two years. IT firms have reduced headcount, financial institutions have slowed recruitment and government hiring has remained muted. Wage growth has also softened.There are early signs of slower hiring by Global Capability Centres (GCCs). While some of this reflects post-pandemic overhiring, the impact of AI cannot be ruled out if the slowdown persists.
