Nestlé India flags shaky demand from urban middleclass as incomes lag

Mumbai: India’s urban middle class may emerge as the weak link in the consumption story as income growth fails to keep pace with inflation, prompting consumers to postpone discretionary spending, says Manish Tiwary, chairman and managing director of Nestlé India. The warning comes as fast-moving consumer goods (FMCG) firms have begun hiking their prices to offset higher input costs and as concerns grow about 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 there are some of the inflation factors that we talked about… the growth in real earnings has not kept pace,” Tiwary said at the Citi India Conference 2026 in Mumbai.

This delay may affect discretionary spending. “We’re seeing a bit of a wait-and-watch period where consumers can push discretionary spending aside,” he said. Nestlé India sells a variety of products, from Maggi to Nespresso machines.

But he said the top of the pyramid (about 30-40 million high-end customers, including the premium segment) is “extremely resilient.” Tiwary said that the rural market, which accounts for a large share of the volume growth of Indian consumer goods companies, continues to be in good shape, adding that he is confident about the overall growth prospects of the sector.

Nestlé India reported a 26% year-on-year increase in standalone net profit. ₹1,114 crore in the March quarter of FY26. Announcing its earnings, the company stated that the performance was due to double-digit growth in volumes.

Many Indian FMCG companies reported record high volumes in the March quarter, helped by the end of goods and services tax (GST) cuts in September.

K-shaped recovery

India’s post-pandemic recovery is often described as ‘K-shaped’; while premium consumers and rural demand remain afloat, the urban middle class remains under pressure.

Reductions in GST rates have helped alleviate some of this pain. However, supply disruption and price increase across segments caused by the war in West Asia are likely to eliminate much of this advantage for FMCG players. Players like Hindustan Unilever Ltd, Britannia Industries and Dabur India have started increasing prices over the last few months.

While the retail inflation rate in India increased from 3.40% in March to 3.48% in April, wholesale price index-based inflation increased to 8.3% during the month, the highest level in 42 months.

Much of the inflationary pressure on the sector comes from disruption in energy supplies from West Asia, where the crucial Strait of Hormuz remains closed and crude oil supplies are disrupted. Even if FMCG companies may not use crude oil directly in production; The spillover effect across the economy, from fuel to packaging and transportation, is increasing production costs and forcing many companies to shoulder some of the burden.

However, Nestle is focusing on volume-driven growth. Tiwary said of the risks of price increases: “Especially during a crisis, your consumer’s voice needs to be much louder if you want to be truly resilient.”