India's urban consumption likely to slow down as RBI may hike lending rate by 50 bps in April

“The exceptional growth momentum in urban consumption has come off whereas rural is just about holding up steady. So, the urban and rural, they are now almost converging in terms of their growth momentum, and the investment growth momentum continues at a pretty decent clip,” he said.

Meanwhile, Indranil Sengupta, Head-Research and Economist at CLSA India, also weighed in on the situation and stated that the mass segment is still seeing a cut in consumption.

Sengupta agreed that the economy is heading towards slower growth and added that the Reserve Bank of India (RBI) may be forced to act in response.

According to Sengupta, the RBI may choose to hike rates by 50 basis points in April and may even cut rates by 100 basis points in the next fiscal year.

“We do think the RBI will hike another 50 basis points by April and then maybe cut 100 basis points in the second half of next fiscal. So, a combination of slowing world growth and rising real lending rates at home, which is why we do think that growth will dip,” he said.

Overall, the outlook for the Indian economy is somewhat uncertain at this time, with experts divided on the best course of action. However, both urban consumption and the mass segment will be key factors to watch as the situation develops.

For the entire discussion, watch the accompanying video