Mumbai: India’s urban middleclass may be emerging as the weak link in the consumption story, with its income growth failing to keep pace with inflation and prompting consumers to defer discretionary spending, says Nestlé India chairman and managing director Manish Tiwary. The warning comes as fast-moving consumer goods (FMCG) firms have started hiking prices to offset higher input costs, raising concern over the durability of the recent recovery in urban demand.
“The challenge (in India’s growth story) is more in the urban areas. That’s where some of the inflation factors we’ve been talking about… the growth in real earnings has not kept pace,” Tiwary said at the Citi India Conference 2026 in Mumbai.
This lag could affect discretionary spending. “That’s where we see a little bit of wait and watch, where consumers could push out discretionary expenditure,” he said. Nestlé India sells products ranging from Maggi to Nespresso machines.
He, however, said the top of the pyramid—about 30-40 million top-end customers, including the premium segment—is “extremely resilient”. The rural market that accounts for a major share of the volume growth for Indian consumer goods companies is also continuing to do well, said Tiwary, adding that he remains confident of the industry’s overall growth prospects.
Nestlé India reported a 26% year-on-year rise in its standalone net profit at ₹1,114 crore in the March quarter of FY26. Reporting its earnings, the company had said the performance was driven by a double-digit growth in volumes.
Many Indian FMCG companies reported record high volumes in the March quarter, aided by the playing out of the goods and services tax (GST) rate cuts of September.
K-shaped recovery
India’s post-pandemic recovery has often been described as ‘K-shaped’, with premium consumers and rural demand holding up while the urban middleclass remained under pressure.
The had helped ease some of that strain. However, the -induced supply disruption and price rise across segments is set to undo much of that benefit for FMCG players. Players such as Hindustan Unilever Ltd, Britannia Industries and Dabur India have started hiking prices over the last few months.
India’s retail inflation rate rose to 3.48% in April, up from 3.40% in March, while the wholesale price index-based inflation surged to a 42-month high of 8.3% during the month.
Much of the inflationary pressure for the industry has been stoked by the disruption in energy supply from West Asia, where the crucial Strait of Hormuz remains blocked, disrupting crude oil supply. Even if may not directly use crude oil in manufacturing, its spillover effect across the economy—from fuel to packaging and transportation—is spiking production costs, compelling many companies to pass on some of the burden.
Nestle has, however, been focusing on volume-led growth. “Especially during a crisis, if you really want to be resilient, the voice of your consumer has to be much louder,” Tiwary said about the risks of implementing price hikes.