Indian consumers have been schizophrenic: splurging on durables such as television sets and cars while cutting back on non-durables such as cheese and hair conditioners.
New data on factory output released on Wednesday frames this trend in stark terms. Overall production of consumer goods was up by an impressive 11.1%; but the devil is in the detail. Output of durables was up by an astonishing 37.3% over a year ago while production of non-durables increased by a mere 3.1%. And this gap has been widening since May.
Consumer spending data is notoriously patchy and hence such production numbers are good indications about what families are spending on.
What’s up? We had reported in this newspaper on Monday that discretionary spending is down because high food prices are forcing families to spend less on other daily items. Meanwhile, sales of durables have shot up after tax cuts and government pay hikes. These temporary props of consumer demand will soon be removed. Consumer demand could then be wobbly in inflationary times.