Urban consumption on the way up, recovery signs already visible: ITC report

Urban consumption, whose slowdown has worried economists over India’s growth story, is expected to pick up progressively, according to the annual report of atta-to-agarbatti conglomerate ITC, released on Friday evening.

 

The Kolkata-based company says the recovery signs are already visible, led by the continued recovery in rural demand backed by a good monsoon. This will be additionally helped by the improvement in urban demand as inflation stabilises and tax cuts announced in the Union Budget boost disposable incomes.

 

What this means would be that India’s macroeconomic variables are expected to remain stable in the year ahead, with GDP growth for FY 2025-26 expected to be approximately 6.5 per cent.

 

India’s GDP growth in the last financial year was 6.5 per cent though most estimates forecast a slight slowdown in the ongoing financial year. ICRA, for example, says India’s GDP growth rate in FY2026 will be 6.2 per cent.

 

However, according to ITC, the cumulative impact of pickup in capital expenditure in the second half of the last financial year and front loading of government capital expenditure outlay for this financial year, along with interest rate cuts and liquidity support from RBI, would also be supportive of growth.

 

ITC said the Indian economy is poised to grow rapidly in the years ahead driven by structural factors such as a favourable demographic profile, increasing affluence, rapid urbanisation, accelerated digital adoption and the entrepreneurial spirit of its people. The government of India’s thrust on strengthening the country’s physical and digital public infrastructure, focus on enhancing the competitiveness of the manufacturing sector, indirect/direct taxation and financial sector reforms, along with measures to promote ease of doing business, are expected to power the economy going forward.

 

While higher capital expenditure outlays and focus on infrastructure are expected to drive growth and competitiveness of domestic manufacturing, focus on agriculture related schemes is expected to boost farmers’ welfare and rural consumption demand, spurring a virtuous consumption-investment-employment cycle.

 

Policy interventions focused on supporting sustainable livelihoods and fostering inclusive growth remain critical in sustaining and accelerating India’s economic growth path, the report warned. Structural support would need to be provided to sectors with the potential for large economic multiplier impact. In this regard, the development of robust domestic agri- and wood-based value chains holds special importance in the Indian context, given their enormous potential to contribute to national objectives, it said.

 

ITC, originally a cigarette manufacturer, presently has a diversified portfolio which has seen it become India’s most valuable consumer company, with market leader products in food items (Aashirvaad atta) to stationary (Classmates).

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