Context : Stagnant Income Levels
- 55% of urban consumers reported unchanged income in January 2025, the highest in 11 years.
- Decline in the share of respondents who reported an increase in income.
Relevance :GS 3(Indian Economy)
- Employment Concerns
- 42.7% of respondents observed a decline in job opportunities compared to the previous year.
- Employment optimism, which had improved post-pandemic, started reversing in mid-2024.
- Inflation Trends
- Retail inflation eased to 4.31% in January, a five-month low.
- 93% of respondents still felt that prices increased, but this was the lowest since July 2024.
- Consumer Spending Perception
- Essential Items: 87.6% reported increased spending, the lowest since September 2024.
- Non-Essential Items: A slight increase in those reporting unchanged spending, with a marginal decline in those saying spending increased.
- Economic Sentiment
- 43% of urban consumers felt the overall economic situation worsened in January 2025, the highest in at least a year.
- Pessimism about income and job prospects overshadowed optimism from lower inflation.
Implications
- Consumer Confidence: A weak employment market and stagnant incomes may dampen economic sentiment, affecting consumer spending and business investments.
- Policy Challenges: The government may need targeted interventions, such as employment generation schemes or wage support, to boost purchasing power.
- Growth Prospects: Reduced consumer spending, especially on discretionary items, could slow down overall economic growth.
- Long-term Impact: If income stagnation persists, it may widen income inequality and hinder aspirations of upward mobility among urban households.
