FM Nirmala Sitharaman as Keynote speaker at 53rd National Management Convention of the All India Management Association.
NEW DELHI: Union Finance Minister Nirmala Sitharaman used her keynote address at the 53rd National Management Convention of the All India Management Association on September 22, 2026 to deliver a direct critique of corporate India’s recent strategic focus, warning that an overreliance on urban premiumisation threatens the durability of the country’s economic growth. Speaking to an audience of corporate executives and policy analysts in New Delhi, Sitharaman argued that India sits at a “structural inflection point,” where rising incomes are pushing millions of households into brackets where discretionary spending begins, but cautioned that corporate strategy has not kept pace with that shift.
“If corporate India pursues premiumisation for the urban tier alone, growth will lose its structural durability,” she said, adding that the country’s consumption base rests on working families across agriculture, rural construction, transport and informal enterprise, not solely on the formal urban elite.
Two Years of Chasing the Premium Buyer
The Minister’s remarks land against a backdrop of a genuine corporate pivot. Between 2024 and 2026, premiumisation, the strategy of shifting capital and marketing toward higher-priced product variants, became the dominant revenue engine for consumer-facing companies in India. The logic was straightforward: elevated input costs and urban food inflation compressed margins, while formal-sector wages among the top 10% to 15% of urban households held resilient, creating a price-inelastic buyer base that let companies protect earnings through premium SKUs rather than volume growth.
The pattern shows up consistently across sectors. FMCG portfolios saw value growth consistently outpace unit volumes, with launches skewed toward premium liquid beauty products and gourmet coffee while mass-market bar soaps and sachets stagnated. In autos, entry-level 100cc two-wheelers and hatchbacks contracted even as SUVs and high-displacement motorbikes posted record market share gains. Real estate developers, meanwhile, overwhelmingly prioritised luxury housing, causing a sharp drop in affordable launches under ₹50 lakh.
Why the Math Eventually Breaks Down
Sitharaman’s underlying argument rests on a fairly conventional but consequential piece of economic reasoning: the marginal propensity to consume differs sharply across income groups. Affluent households tend to channel incremental income into financial assets, real estate or overseas travel, generating comparatively weak domestic demand multipliers. Working families in agriculture, construction and informal enterprise, by contrast, spend almost their entire incremental income on food, clothing, appliances and mobility, generating far stronger multiplier effects for domestic manufacturing. Given that agriculture and allied activities alone employ over 45% of India’s workforce, a corporate strategy built around a narrow urban elite effectively caters to a small fraction of the country’s actual labour force, and risks capping the very economies of scale that make Indian manufacturing globally competitive.
The Public-Private Capital Gap
To make her case, Sitharaman contrasted the government’s own investment posture with corporate India’s. Union capital expenditure for FY27 exceeds ₹12 lakh crore and effective capital expenditure, including grants to states, tops ₹17 lakh crore, with Gross Fixed Capital Formation running above 34% of GDP and growing nearly 12% year-on-year in the first quarter. Manufacturing capacity utilisation, meanwhile, has reached 75%, traditionally the threshold at which private capex expansion tends to kick in. Yet India’s Gross Expenditure on R&D sits at just 0.83% of GDP, far below the OECD average of 2.7%, China’s 2.6% or the United States’ 3.5%. More tellingly, India’s private sector contributes only 36% of total national R&D spending, compared to over 70% in advanced economies, a gap Sitharaman framed as central to her call for shifting from “Made in India” toward products genuinely “imagined in India,” meaning domestically owned intellectual property, patents and design.
A Geography Beyond the Metros
The Minister also pointed to investment activity spreading beyond India’s traditional Tier-1 hubs, citing cities including Coimbatore, Vadodara, Visakhapatnam, Indore, Bhubaneswar and Jaipur as emerging nodes for advanced electronics, biotechnology, specialty chemicals and precision engineering. This regional diffusion, she suggested, is generating localised purchasing power that corporate distribution networks have yet to fully capture, leaving a gap between where capital is flowing and where products are actually being sold.
What Corporate Realignment Would Actually Require
Sitharaman’s framework implies fairly specific shifts across sectors. FMCG companies would need to pivot from price hikes toward volume growth through accessible premium and value-engineered products, backed by deeper rural distribution investment. Automotive manufacturers, having already benefited from GST rationalisation that cut rates from 28% to 18% on two-wheelers up to 350cc and entry-level small cars, have a clearer opening to restore focus on affordability. Real estate developers would need to redirect land banks toward affordable and mid-income housing near regional industrial corridors, while digital and quick-commerce platforms extend logistics networks into Tier-2 and Tier-3 markets.
The Tension Nobody Has Fully Resolved
None of this is without friction. Mass-market goods typically carry lower margins and require heavier working capital for rural distribution, and public equity markets have historically rewarded short-term margin expansion over multi-year volume investments, creating a genuine strategic dilemma for corporate boards answerable to shareholders. Persistent food inflation also threatens to erode the very real wage gains that would make broad-based consumption durable in the first place.
Whether corporate India actually responds to this message, or continues treating premiumisation as the safer bet, will likely show up in a handful of measurable places over the coming quarters: whether FMCG volume growth starts converging with value growth, whether private R&D spending climbs meaningfully beyond its current 36% share, and whether affordable housing launches begin reversing their recent decline. For now, Sitharaman has drawn a clear line between what the government is building and what the private sector has chosen to sell and it remains an open question how quickly that gap closes.
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