The Squeeze on India’s Spenders Is Yet to Lift

Manufacturing of wants is hard anywhere for marketers, but the challenge is bigger when the bottom half of the population takes home only 13% of national income. While India’s rapid economic growth since the 1990s has undoubtedly expanded the spending capacity of its 1.4 billion people, acute and rising inequality — among the worst in the world — makes for a notoriously budget-conscious median consumer. Companies can take nothing for granted: For Unilever’s local Indian unit, a late winter crimped sales of skin-care products last quarter.

Still, the maker of Dove body wash and Surf detergent managed to eke out an overall 5% increase in sales volume from a year earlier, lifting net income to 25.1 billion rupees ($309 million), slightly better than expected. That was achieved by price cuts — passing along the benefit of lower palm-oil costs to soap buyers — and a step up in promotion and advertising. Still, not all players have the market leader’s financial chops. Investors who look closely at Hindustan Unilever Ltd.’s earnings for a pulse on India’s consumer demand will note with dismay the slide in industry-wide volumes for cleaning liquids, personal care items and food, the categories in which the firm competes.