Household demand revival still tentative as high debt levels and weak income posing challenges: Report

New Delhi, June 18 (ANI): The revival in household demand across India remains fragile as high levels of debt and weak income continue to pose serious challenges, according to a recent report by Systematix Research.

Advertisement

The report added that while some signs of improvement are visible, the broader recovery is expected only in the second half of FY26.

It said, "Evidence of demand revival still tentative...Rural purchasing power recovers modestly due to disinflation, but stagnant incomes limit gains".

The report highlighted that rural purchasing power has seen a modest recovery, mainly due to softening inflation.

However, stagnant incomes are limiting any significant gains. In urban areas, consumer sentiment remains low, affected by weak job conditions and high prices. Fiscal consolidation by the government has also played a role in curbing consumption.

It said, "RBI's monetary easing aims to revive consumption, but high household debt and weak income pose challenges."

The report added that any meaningful recovery in demand is more likely in the latter half of FY26.

In terms of sectoral trends, the report observed that passenger vehicle sales have seen slight growth, but two-wheeler sales, consumer durables, and foreign travel have weakened, indicating reduced discretionary spending by consumers.

While consumer staples saw modest growth, rural markets performed better than urban ones. Some discretionary segments, such as value retail, showed resilience. Bank lending has also slowed, except for loans against jewellery, which signals growing financial stress among households.

On rural demand, the report stated that the recent recovery is largely driven by disinflation, not an actual rise in incomes.

Nominal rural wages have continued to rise at an average of 6 per cent over the past year. Rural inflation eased by 3.8 per cent in February 2025, resulting in a 2.3 per cent increase in real rural wages, the highest since May 2019.

However, the six-month average wage growth remains modest at just 0.7 per cent, suggesting that this gain may be temporary.

While consumer goods companies have reported better rural demand compared to urban areas, the report cautioned that this improvement may not be sustainable, as it heavily depends on the trend of slowing inflation rather than actual income growth. (ANI)

(The story has come from a syndicated feed and has not been edited by the Tribune Staff.)