India is one of only two regions where a majority of the world’s leading economists expect households to grow better off over the next 12 months, even as rising cost of living is set to squeeze real incomes almost everywhere else, according to the World Economic Forum (WEF)’s latest survey released on Tuesday.
Indian economists, however, warned that the reprieve may not last.
Across the survey conducted for the WEF’s Chief Economists Outlook in August, most of the 36 participating economists expected inflation-adjusted incomes to fall or stagnate in nearly every geography with India and South-East Asia being the notable exceptions, where over 60 per cent of the respondents anticipated increases.
The pessimism elsewhere is driven by an intensifying cost-of-living squeeze, as respondents expect household costs to climb across the board, led by food (88 per cent of respondents), electricity (83 per cent) and transport (77 per cent).
“In many geographies, rising costs of living clash with stagnating or decreasing household incomes. Aside from South-East Asia and India, the majority of chief economists surveyed expect inflation-adjusted household incomes either to remain unchanged or to decline in all geographies,” the WEF noted.
However, Indian economists do not necessarily share the survey’s optimism about household incomes. Madan Sabnavis, chief economist at Bank of Baroda, pushed back on the WEF’s assessment, arguing that rising prices are a worldwide phenomenon India cannot sidestep, and that the sense of protected real incomes is misleading since the full pass-through of costs has yet to work through.
“Higher prices are a global phenomenon, and that holds also for India,” he said.
He expects retail inflation to climb toward the Reserve Bank of India (RBI)’s own projection of about 6 per cent within a couple of months, which would begin to eat into real incomes. “For us the major threat is food inflation rather than non-food inflation, which is the case for the other countries,” Sabnavis added.
The wide gap between near-double-digit wholesale inflation and far milder retail readings, Sabnavis added, reflected buffering by the government and oil marketing companies (OMCs) rather than genuine relief for households, leaving consumption exposed if food prices rise due to non-optimal monsoon.
Gaura Sengupta, chief economist at IDFC First Bank, argued that the survey’s optimism holds for now but hinges on where crude oil prices go. “Urban wage growth should hold up in real terms, as long as crude oil prices ease a bit in the second half (H2),” she said.
The main risk, she added, lies in the supply side: if the crude shock persists into the H2 2026-27 (FY27), companies will eventually hit the limit of how much they can absorb, squeezing margins and slowing nominal wage growth.
She also flagged that India’s consumer has been shielded in a way developed-market households have not. “In developed countries it has been fully transmitted to the consumer, in India the government and the OMCs have absorbed the shock,” she said.
“We expect the adverse monsoon impact to be felt more from the fourth quarter (Q4) onwards, post the harvest season,” Sengupta reckoned.
India’s standout position on household incomes mirrored its broader showing in the survey, where it retained the strongest growth outlook of any geography covered. Of the chief economists polled, 98 per cent expected moderate or stronger growth in the country over the next 12 months, with 74 per cent anticipating strong or very strong growth — a sharp jump from 52 per cent in the Outlook’s May edition.
The report noted that the growth forecast for FY27 was raised to 6.7 per cent in August from 6.5 per cent anticipated in May, reflecting continued resilience in domestic demand.
“Growth is expected to remain supported by resilient domestic demand, although higher energy prices continue to weigh on the outlook,” it cautioned.
That optimism sits against a domestic backdrop of high growth but divergent inflation signals. Official data released by the National Statistical Office (NSO) on Aug 31 showed the economy expanded 7.8 per cent in the April-June quarter (Q1FY27), beating the RBI’s 7 per cent projection, despite geopolitical headwinds from the West Asia crisis. Growth outpaced the 6.9 per cent recorded a year earlier, even as it eased from 8.6 per cent in the preceding March quarter.
The two headline gauges, meanwhile, have been pointing in opposite directions. Retail inflation, measured by the Consumer Price Index (CPI), climbed to 4.82 per cent in August from 4.45 per cent in July — a 20-month high on a back-series basis, and above the RBI’s 4 per cent median target for a third straight month.
The WEF survey captured a softening of expectations here: 55 per cent of respondents now expect moderate inflation in India and 45 per cent high inflation, an improvement from May, when 61 per cent anticipated high or very high inflation.
According to official government data, Wholesale Price Index (WPI) inflation climbed to 9.92 per cent in August from 9.78 per cent in July, its second-highest print in 29 months with the pressure concentrated in energy.
Additionally, policy expectations, as captured in the survey, point to steadiness. A majority of respondents (67 per cent) expect the RBI to hold monetary policy unchanged over the coming year, while 24 per cent anticipate tightening.
The central bank has kept its repo rate at 5.25 per cent for four consecutive reviews and will hold its next Monetary Policy Committee (MPC) meeting on October 5-7.
On the fiscal side, 72 per cent expected no change and 22 per cent see looser policy.
The labour-market readings of the survey revealed that around 70 per cent of economists expect India’s unemployment rate to hold steady, with the remainder split between an increase (17 per cent) and a decrease (13 per cent).
Official figures showed the jobless rate for those aged 15 and above easing to a five-month low of 5 per cent in August from 5.1 per cent in July, as both the labour force participation rate (LFPR) and the worker population ratio (WPR) strengthened.
“These developments point to relatively stable labour market conditions alongside strong activity, although sustained employment creation remains important,” the report noted.
However, not every indicator flattered India. Equity performance has lagged, with the Nifty 50 down 7.9 per cent since the start of the year as of August 19, the survey added.
