Coincidence, correlation, or causation could be the cause. Within a year or so, the CEOs of six of the biggest packaged goods and retail companies in India—Hindustan Unilever, Nestlé, Britannia, Godrej Consumer, Colgate-Palmolive, and DMart—left their positions. To be perplexed, one need not delve into a forensic evaluation of the individuals or the caliber of the boards.
India's economy growth rate for the April–June quarter will be revealed ; assuming projections are accurate, the GDP would have increased by about 7.2%. That is commendable in light of the world's uncertainty. "Consumption is the sole end and purpose of all production," according to Adam Smith. According to the mantra, consumption would have been strong in the previous quarter.The picture starts to appear intriguing when you go down the data ladder; it is, in fact, complex. People who spend money on a car or a durable are not spending money on everyday necessities. The company's results reveal an increase in revenue growth but a concerning stalling of volume and/or value. Nielsen-IQ reported dismal growth in the January–March quarter. If you ask the pundits a question, they will likely tell you about the hyper-competition brought on by new models and attack you with terms like shrinkflation and premiumization!

The performance of listed entities serves as the best example of the demonstration of value. With -1% annual returns, the Nifty50 is widely recognized as one of the poorest indices in the world right now. With a negative return of -16 percent over the last three years, Nifty FMCG is the sectors index with the worst performance—worse than the severely troubled Nifty IT index.

The most well-known brands in the industry have been de-rated by investors: Godrej Consumer is down 26.3%, Hindustan Unilever is down 24.2%, DMart is down 19.4%, Trent is down 17.9%, and Britannia, which is comparatively a survivor, is still down 8.8%. Over a five-year period, Godrej CP and HUL are at -12.5 percent and -25 percent, respectively, while DMart, previously the most sought-after stock, is flat. Temasek is an investor in the massive packaged food company Haldiram, which has a valuation of more than $10 billion.

The retail and FMCG figures are not sector-specific, but rather a macro signal.GDP statistics show the reality. For more than 12 quarters, PFCE, or the total amount of money spent by households, has averaged about 56.5 percent of GDP. It includes everything from cars to onions to imputed rent. Given that the economy is expanding at a rate of more than 7%, why is the basic consumption basket stagnating? In essence, the divergence is what Peter Atwater referred to as the "K-shaped economy" in 2020—one in which the ends are splitting rather than growing together.

The difference between volume and value is the issue for FMCG companies, while the gap between employment, income, and consumption is the issue for the economy. Start with the rural environment. According to Arindam Das and Yoshifumi Usami's analysis of labor bureau and National Statistical Office data on rural wages from 2014–15 to 2022–2023, real wage rates stagnated at less than 1% and "the growth of wage rates in rural areas virtually collapsed for all agricultural and non-agricultural occupations."

Similar trends may be seen in urban earnings, which are stagnant despite being pressured by growing expenses. Real wage growth averaged 5.7% between 2020 and 2026, according to an India Ratings wage assessment. There is a clear correlation between salaries and consumption. V Anantha Nageswaran had cautioned businesses that low pay would affect customer demand and be detrimental to the corporate sector.

Two wage-setting regimes coexist in India's political economy. One is market-driven and serves the rural and informal majority that really purchases the goods on FMCG shelves, while the other is institutional and consistently compounding and serves a declining portion of the workforce. Given the amount of people in India's workforce between the ages of 15 and 59, the number of salaried workers in the private sector is quite small. Only 21.7% of India's 65.4 crore workers receive a regular wage or salary, according to Niti Aayog. This figure puts India close to the bottom of the global chart, between Timor Leste and Guinea-Bissau.

Government workers come next. Think about this to understand the power of collective bargaining. 37.8 lakh people were employed by the central government in 2001. 32,693 crore is the wage bill. 32.8 lakh workers and $1,50,569 crore in 2015–16. 36.2 lakh workers and $3,67,182 crore in 2026. Indians make about $2,20,000 a year per capita. Calculate the multiplier of the average government employee's per capita income.

Nevertheless, government workers do not define the consuming narrative. Apparently, businesses are aware that there is an underlying demand issue. They can't always deal with this uncomfortable reality. Boardrooms are adjusting to a market where consumption is stratified and fast reach is more important. The rural economy employs more than 45% of the labor force. According to the Niti Aayog, 19.8% of workers identify as casual employees and 58.4% of workers identify as self-employed.

The arithmetic of growth is not the only issue facing India. There are two economies in the nation that are growing at separate rates. Creating policies that free the trapped fortunes of millions of people who are currently merely statistics in government surveys is necessary to escape the middle-income trap.