Essential consumption.

"Data released by the National Statistics Office (NSO)...showed retail inflation, as measured by the consumer price index (CPI), slumped to 2.8% in May, below the 3.2% in April." " Food inflation eased to nearly 1% in May, with a sharp decline of 79 points during the month compared to April." TOI. The Reserve Bank of India (RBI) has already anticipated the fall in the rate of inflation by announcing a "jumbo" cut of 50 basis points (bps) in its policy rate and a 100 bps cut in the Cash Reserve Ratio of banks, starting on 6 September, which is expected to release Rs 2.5 trillion into the banking system, despite already adding "Rs 9.5 trillion to durable liquidity", according to Governor Sanjay Malhotra. The 2.8% rise in inflation in May is on top of a 4.8% rise in the same month in 2024, which was on top of a 4.3% rise in 2023, 7.0% in 2022, 6.3% in 2021 and a 6.3% rise in May 2020. rateinflation.com. Since inflation compounds year-on-year, any rise in inflation just worsens the purchasing power of households. It, however, is a great boon for the government as the average monthly GST collections have risen from Rs 899 billion in 2017-18 to Rs 1.84 trillion in 2024-25 (Tata nexarc). Not surprising that, "Private consumption in the Indian economy moderated slightly in the fourth quarter (January-March 2025) of FY25, according to a recent report by the Bank of Baroda." The RBI's Consumer Confidence Survey in January 2025 showed that 64.4% of the 6081 respondents said that their expenditure had risen more than income, with "More than 40% of the respondents saw their spending rising while their income remained the same, while the remainder saw spending rise or remain the same while incomes fell." Essential spending has risen faster than non-essential spending, wrote Roshan Kishore. As a result of the mismatch in expenditure and income, the share of personal loans in the Private Final Consumption Expenditure (PFCE) has doubled between 2011-12 and 2024-25, wrote Kishore. Rising prices helped, "Indian corporate profits hit a remarkable 17-year high in F25, with Nifty-500 companies achieving a profit to GDP ratio of 4.7%, according to a report by Motilal Oswal." "Nifty-500 companies demonstrated, resilience with 10.5% year-on-year profit growth in FY25, building upon FY24's 30.5% increase and achieving a five-year CAGR of 30.3%." TOI. Profits are being generated by raising prices and not by increasing volumes, as "India's soft industrial momentum, a widening trade gap, and early signs of business caution warrant close tracking as H2 2025 unfolds, according to a report by LLama Research." "The Index of Industrial Production (IIP) has slowed to 2.7%, due to weakness in mining, manufacturing and electricity sectors." ET. If manufacturing is soft there will be lower demand for minerals and electricity. It's logical. With the RBI hacking interest rates, companies will be able to borrow at lower rates to pay back previous debt borrowed when rates were higher. That will increase their profits even further and possibly increase tax collections. Companies profit on household debts. Greed is good. Reddit.