Consumption to remain a tale of two halves
Daniel Kahneman in his book, Noise - A Flaw in Human Judgement, uses the term availability heuristic, which suggests we operate on the notion that if something can be recalled, it must be important or at least more important than an alternative solution. In a similar breath, varied notions of consumption and its anticipated recovery are written about. In this piece, we use hard facts to show how and why India is seeing a K-shaped recovery in consumption.
No reversal yet seen in K-shaped recovery
A consistent sentiment evoked after the Q2FY23 results across consumer companies was of the likelihood of demand recovery from 2HFY23, especially from rural markets. But this has not played out as anticipated. We have been sceptical of demand recovery, especially in the mass consumption category, as we believed the fault lines which began to appear during Covid only got accentuated due to subdued macro-economic situation coupled with stubborn inflation.
In the near term, the rural segment may show volume growth but we believe it would only be optical since it comes on a low base versus that driven by a structural uptick driven by improving macros. So we believe that the K-shaped recovery spoken about during Covid is yet to reverse and consumption will remain a tale of two halves.