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Saturday, Dec 04, 2021
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Cheap Thrills

Prices of everything from soaps to ACs to bikes is crashing. Is everything alright?

Cheap Thrills
Tribhuvan Tiwari
Cheap Thrills
outlookindia.com
-0001-11-30T00:00:00+05:53

Rohit knows this has something to do with the economic growth. The latest numbers are a jaw-dropping 10.4 per cent for Q3, which brings the average GDP growth to 8.2 per cent in 2002-03. But he wonders how the companies can manage to cut prices so hugely every year. He knows that they have to either sell many more units or their profit margins would get squeezed. With such good growth, many more Indians would have turned vigorous buyers. But then, he tells his wife, perhaps these companies were taking them for a ride. Why should a kilo of good detergent cost more than Rs 50?

Rohit could well be right on all counts. India is shining brighter everyday but there are still pockets of the economy under dark shadows. Prominent among these is the fast-moving consumer goods (FMCG) sector. Most of these are consumer expendables and hence per unit household demand for these is often inelastic. What that means is the units of detergent, sauce or biscuits you buy is liable to be the same for a fixed household size.

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