Why 'scarcity mindset' still persists in India

Summary

Business Daily — Why 'Scarcity Mindset' Still Persists in India

Host: Divina Gupta, BBC World Service
Date: February 24, 2026

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Overview

In this episode, Divina Gupta explores the “scarcity mindset” in India—a psychological and economic phenomenon where individuals and communities continue to feel the effects of lack and deprivation, even after their material conditions have improved. Through personal stories, expert insights, and a focus on both psychological and macroeconomic perspectives, the episode examines why this mindset endures, how it shapes spending, saving, and risk-taking, and how it impacts the broader Indian economy.

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Key Discussion Points & Insights

1. Defining the Scarcity Mindset in India

• Historical Context:
  For generations, many Indians faced severe scarcity in food, water, electricity, and jobs. While economic growth has shifted millions into the middle class, anxieties about not having enough persist in new ways.

  “For decades, many lived with real scarcity … But today, even as the economy grows … the fear of not having enough hasn't disappeared. Instead, it has taken a new form.” (Divina Gupta, 01:17)

2. Personal Testimonies: The Lived Experience of Scarcity Mindset

• Pali (IT Consultant, Telangana):
  Grew up in extreme poverty, fetching water before dawn and often going without reliable electricity or food. Despite higher income and improved living conditions, he finds himself overeating out of an ingrained fear of future hunger.

  “When I get the food, I really eat a lot thinking that … I might not get it.” (Pali, 01:48 / 03:45)

• Aastha Chandra (Delhi):
  Her scarcity experience wasn’t about money, but about access—specifically to shoes in her large size. It led to hoarding behaviors and emotional distress about not having what others did.

  “Whenever something would fit me, then I would pick that up in all the colors … I remember buying a blue heel, kitten heels, and multiple pairs only because I felt that I’m not going to find it again.” (Aastha Chandra, 06:04) “When I was in a scarcity mindset, it was always like: ‘I don't have as pretty shoes as the others.’ … Sometimes I would end up spending much more than my budget.” (Aastha Chandra, 06:46)

• Meeta Gupta (Founder, Moolah for Women, Dubai):
  Initially enjoyed financial security, but as an adult, developed a scarcity mindset due to a lack of financial clarity and alignment with her partner. This led her to extreme caution in spending and risk-aversion in her business ventures.

  “I became defensive when it came to my money. I did not want to spend my money in things which I would have wanted to spend my money on.” (Meeta Gupta, 12:08) “You start feeling jealous … you start thinking that I don’t have enough and the other person is so lucky.” (Meeta Gupta, 13:27)

3. Psychological Underpinnings of Scarcity

• Expert Insight — Eldar Shafir (Princeton University):
  • Scarcity isn’t just about lack of money, but a reduction in mental bandwidth—constant cognitive load reduces capacity for other important tasks.
  • Research with Indian farmers highlighted reduced cognitive performance during times of financial scarcity.

    “A lot of their mental capacity is devoted to juggling not having enough, and during that time, they just have less mental space left for other things and they perform less well.” (Eldar Shafir, 04:52)

  • The mindset often persists even after material conditions improve:

    “The scarcity mindset … can occupy even people who are living a relatively or even a very comfortable life.” (Eldar Shafir, 05:32)

4. Scarcity Mindset & Consumer Behavior

• Marketing Tactics:
  • Marketers exploit scarcity fears through limited-time offers, “only a few left” messages, and exclusive collectibles to manipulate consumer behavior.

    “Discounting and offers … make them believe that the offer is scarce … creating limited edition or a season … is the second level of scarcity that people are now or marketers and brands are now creating.” (Shraddha Garb, 07:32 / 08:30)

  • Such promotions work across socioeconomic strata: bargains attract the middle class, while exclusivity appeals to the wealthy.

    “With high net worth individuals, it works fantastically well … people who are middle class who want more out of their buck gets attracted.” (Shraddha Garb, 08:46)

5. Economic Consequences: Individual and Macroeconomic Effects

• Risk Aversion in Business & Society:
  • Scarcity mindset drives excessive saving and risk aversion, particularly affecting MSMEs (medium, small, and micro enterprises), potentially limiting growth and innovation.

    “They are the ones who are rethinking, should I set up one more unit or not … and all of these things require that risk taking ability … status quoism is sort of then constraining growth in the investment landscape as well as in the real estate space.” (Mithali Nikore, 14:00)

  • India's past high savings rates were driven by scarcity and uncertainty. Recent years have seen cautious consumer and investment behavior, even among the young.

    “Amongst the younger generations, India has traditionally seen more a buy now, pay later mindset … But now we're starting to see even younger people say, okay, maybe I will not take a consumption loan.” (Mithali Nikore, 14:00)

6. Policy Interventions & Breaking the Cycle

• Role of Policy:
  • Fiscal interventions like tax cuts and cash transfers (e.g., GST reduction in 2020) have provided temporary boosts in consumer confidence and spending.

    “It was like a huge boost to festive consumption spending … we’re actually seeing … buying rates … saw huge boosts.” (Mithali Nikore, 16:55)

  • However, overcoming scarcity mindset requires more than material support—it’s also about psychological security and satisfaction.

    “If you're living a minimally acceptable life and everything is well and you have access to food and medical … then not aspiring for too much more obviously is one key to living a more satisfying and happier existence.” (Eldar Shafir, 17:47)

7. Personal Strategies for Moving from Scarcity to Abundance

• Financial Clarity and Gratitude:
  • Personal development involves understanding money, planning, and cultivating gratitude.

    “One is to understand how money works … But the larger context is about the mindset that you create around money … it's more to be able to start working on your mind and start having gratitude as your way and more clarity around your money.” (Meeta Gupta, 18:34)

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Notable Quotes & Memorable Moments

• “It's not how much money you have, it's how much mental space that money occupies.”
  — Meeta Gupta (10:34)
• “A lot of their mental capacity is devoted to juggling not having enough.”
  — Eldar Shafir (04:52)
• “Limited offers, countdown clocks, only a few left messages and FOMO, or the fear of missing out, are all trapping into this emotion.”
  — Divina Gupta (07:18)
• “Frugality … is taking your decisions out of that feeling of empowerment and clarity. However, when you take these decisions from a defensive standpoint … it was more of a mental construct.”
  — Meeta Gupta (12:49)
• “Now we're starting to see even younger people say, okay, maybe I will not take a consumption loan … and that's a very recent phenomenon.”
  — Mithali Nikore (14:00)
• “If you're living a minimally acceptable life and everything is well … not aspiring for too much more obviously is one key to living a more acceptable and more satisfying and happier existence.”
  — Eldar Shafir (17:47)

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Key Timestamps

• 01:17 — Introduction to scarcity mindset in India
• 03:45 — Pali describes lifelong food insecurity and its effects
• 04:27 — Eldar Shafir explains the psychological roots of scarcity mindset
• 06:04 — Aastha Chandra’s personal story of scarcity through access (shoe hoarding)
• 07:32 — Marketing tactics exploiting scarcity mentality (Shraddha Garb)
• 10:34 — Meeta Gupta on mental space and scarcity mindset
• 14:00 — Mithali Nikore on economic and generational impacts
• 16:55 — Policy interventions: GST cut and consumption boost
• 17:47 — Eldar Shafir on contentment, satisfaction, and policy limitations
• 18:34 — Meeta Gupta on the personal journey from scarcity to abundance

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Conclusion

The episode concludes that while India is advancing economically, the psychological grip of scarcity remains powerful, shaping spending, saving, risk-taking, and even business growth. Overcoming this mindset is as much about financial security as it is about developing clarity, gratitude, and the mental freedom to enjoy what one has—a process that unfolds both individually and collectively.

Transcript

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[Divina Gupta]

Hello and namaste. I'm Debina Gupta and this is Business Daily from the BBC World Service. Today coming to you from India. India is home to more than a billion people. For decades, many lived with real scarcity, be it food, electricity, water and jobs. But today, even as the economy grows and millions move into the middle class where they can afford a better lifestyle, the fear of not having enough hasn't disappeared. Instead, it has taken a new form.

[Pali]

When I get the food, I really eat a lot thinking that, you know, I might not get it. And even despite me earning a good amount of money and being, you know,

[Meeta Gupta]

best possible spaces, you know when other people are spending and you're not able to spend money because you feel you do not have enough, jealousy creeps and you start thinking that I don't have enough and the other person is so lucky.

[Divina Gupta]

Psychologists call it the scarcity mindset. When experiences of lack sense, sometimes passed down through the generations, continue to shape how people think, spend, save and even relate to others plays out most crucially

[Mithali Nikore]

in the medium, small and micro enterprises. They are the ones who are rethinking. Should I set up one more unit or not?

[Divina Gupta]

So on this program we speak to people from different walks of life in India and explore living with a scarcity mindset.

[Pali]

It is quite difficult. When I was Around I think three and a half or four years old. I remember we are staying in this hut, very small hut. I don't think so. Four people can fit over there.

[Divina Gupta]

Pali is an IT consultant earning nearly $600 in a month. But he grew up as the son of a daily wage worker who did odd jobs and was paid at the end of the day in the southern state of Telangana. So life was difficult for water.

[Pali]

I think we have to go around 4-5km to fetch all the people. Morning around 4:30 to 5:00 clock there a big tank over there, there will be water will be spilling and I used to carry around then one small can like and we used to go and get the water. That's the first thing we have to do it. And electricity? I don't think so we had electricity till then. I was in fourth class for food. See it was not quite available almost all the time.

[Divina Gupta]

Pale tells me that those daily struggles pushed him to study hard and build a better life. Today he owns a home, a car and has a stable income. But the fear of hunger hasn't left him.

[Pali]

I also find even today I really eat a lot of food. I think I understand, you know, there is always this feeling that, you know, I may not get the food and I may not get the food. I think it's very subconsciously feeded, I think because when I get the food I really eat a lot thinking that, you know, I might not get it. And even despite me earning a good amount of money and best possible spaces, even today I think my tendency of, you know, what really gone into my subconscious mind, I really have to come out of it.

[Divina Gupta]

This is where psychology and a person's relationship with resources and money come in. Eldar Shafir is a psychology professor at Princeton University in the United States and has spent years to find out how scarcity affects the human mind.

[Eldar Shafir]

The scarcity mindset we studied is, you know, real time focusing on insufficient resources, on not having enough. And there also, you know, there's interesting psychological effects here.

[Divina Gupta]

Shafir explains that scarcity doesn't just describe a lack of money, but a lack of mental bandwidth. He researched this hypothesis with a group of farmers in southern India. With his co author Sendhil Mulyanathan, what

[Eldar Shafir]

we did is we basically tested these farmers two months before harvest and two months after harvest. After harvest you are quote rich. You have more than what you need before harvest. After 10 or 11 months, you know, you fail to smooth, you run out of money, you're experiencing scarcity and what you find is that during scarcity, they just perform less well cognitively than during plenty. A lot of their mental capacity is devoted to juggling not having enough, and during that time, they just have less mental space left for other things and they perform less well.

[Divina Gupta]

Shafir says this habit of thinking only short term and living in stress doesn't disappear when the income rises.

[Eldar Shafir]

I think some people, you know, grow up in relative poverty and then get out of it and still keep, you know, feeling hungry and walk around with BRE in their pocket. And others just get over it completely and become nouveau riche and buy a, you know, a red Ferrari. So I think it goes in different directions in ways that are very difficult to anticipate. And so the scarcity mindset is something that can occupy even people who are living a relatively or even a very comfortable life.

[Divina Gupta]

For Asthachandra in Delhi, scarcity wasn't about money, it was about access.

[Aastha Chandra]

Growing up, I was a tall kid and my shoe size, even in school was very large. And I would find it very difficult to buy shoes. Whenever something would fit me, then I would pick that up in all the colors that are available and I would hoard. Like I remember, there's this lovely shop once I found this heel which was 41 size, which fitted me very well at his shop, and I must have bought multiple pairs of that. I remember buying a blue heels, you know, kitten heels and multiple pairs only because I felt that I'm not going to find it again.

[Divina Gupta]

For Asta, what began as a practical challenge turned into a habit of hoarding, driven by fear of not finding what she needed again.

[Aastha Chandra]

When I was in a scarcity mindset, it was always like, I don't have as pretty shoes as the others. Like, I don't have the boots, I don't have the heels. And yes, in that moment I would. Sometimes I would end up spending much more than my budget.

[Divina Gupta]

Aastha's story shows how scarcity can be emotional and not material and can lead to overspending. Marketeers understand this psychology very well.

[Pali]

There's one plus one free for $6. One plus one free

[Divina Gupta]

limited offers, Countdown clocks of only a few left messages and fomo, or the fear of missing out are all trapping into this emotion. Shraddha Garb runs a marketing agency, Grapes Worldwide.

[Shraddha Garb]

I think that two fundamental ways of how we look at scarcity mindset, okay, one is discounting and offers where you basically make them believe that the offer is scarce. It is only going to be for a certain period of time. And if you don't take that, you will lose money because then you'll get the same product at a full price. And that has worked very well for us for years and years. But what we've seen recently in the market today is another level of scarcity that people have started creating. I just recently worked for a whiskey brand where we actually created batches of whiskey of only 500 bottles. And every time that 500 bottle finishes, we release another label. But we are not going to repeat the same with minor changes in the ingredients that we're looking at. So creating limited edition or a season or a collection that will not come back is the second level of scarcity that people are now or marketers and brands are now creating.

[Divina Gupta]

So Shraddha, how often do you use this kind of psychology in your marketing campaign?

[Shraddha Garb]

I think very often. But you just need to be very careful about the fact that you're not cheating consumers. You need to genuinely make it limited edition.

[Divina Gupta]

And does it work equally across all consumers?

[Shraddha Garb]

Yes. With H and I high net worth individuals it works fantastically well because they're constantly trying to own a collectible and then use that as a small conversation with their friends and families. If it is about scarce offers, then these people who are middle class who wants more out of their buck gets attracted. But if it's a limited edition high net worth individual will get attracted.

[Divina Gupta]

That's Shraddha Garwal, CEO of Grape's worldwide marketing agency.

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[Divina Gupta]

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[Pali]

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[Divina Gupta]

Emirates book now on emirates.com you're listening to Business Daily on the BBC World Service with me, Divina Gupta. We're talking about living with a scarcity mindset. But scarcity mindset doesn't always lead to spending more. For some, it does the opposite, leading to extreme caution and holding tightly to money.

[Meeta Gupta]

So I think what scarcity mindset literally is, it's not how much money you have, it's how much mental space that money occupies.

[Divina Gupta]

Meeta Gupta grew up in India and now lives in Dubai, where she runs a financial education platform called Moolah for Women or Money for Women. Her scarcity mindset emerged later in life.

[Meeta Gupta]

This whole conversation of scarcity never came into my thought process while I was a child because I never thought about money. My parents were the ones who were taking financial decisions and we were pretty carefree when we were kids. We didn't have any money conversations at home. Money was always there and we've been privileged to that extent that, you know, money never came as a conversation for us to develop a mind of scarcity or otherwise while we were children. But as I grew older and I think when I got married and when I started working and I started having a sense of ownership about my own life, that's when the scarcity mindset started creeping in. And when I say creeping in, it's something very interesting because you don't even realize that it's creeping into your being. Because of the fact that I did not have clarity about how should I go about managing my money or is my money enough because of a lack of alignment between me and my partner in the beginning years, I think that's where money scarcity started.

[Divina Gupta]

Can you give us an example?

[Meeta Gupta]

I started becoming risk averse. I became defensive when it came to my money. I did not want to spend my money in things which I would have wanted to spend my money on. If I felt that money was abundant, I would land up probably spending on more holidays or more buying something for myself, which I enjoy personally. But these are things which I refrained from doing. I started believing that if I spend my money, I will not have enough for my needs for a longer term.

[Divina Gupta]

But Meeta draws a crucial distinction between being frugal and living with a scarcity mindset.

[Meeta Gupta]

I think frugality when it comes from a space of clarity, because you are being frugal because you're aware of your money, you know how much money you have and you have planned your money for the future events of your life and that's why you are taking your decisions out of that feeling of empowerment and clarity. However, when you take these decisions from a defensive standpoint and it has nothing to do with that. I wasn't earning well. Both me and my husband were earning extremely well. It was more of a mental construct.

[Divina Gupta]

And how did that make you feel

[Meeta Gupta]

that you start feeling jealous, you know, when other people are spending and you're not able to spend money because you feel you do not have enough. Jealousy creeps and you start thinking that I don't have enough and the other person is so lucky because they come from a more privileged condition. You know, you don't realize your own the things that you have. And the sense of gratitude doesn't come. There was always a feeling of an aspiration which we felt was unfulfilled.

[Divina Gupta]

And this fear began to affect her business decisions as well.

[Meeta Gupta]

So I think it started from the fact that when I wanted to grow my business, I want to do advertising, I want to be able to reach out to more number of women, I want to do more things with my money, but I don't have enough to be in this mindset. It's literally like a chicken and egg story, because the more you have this mindset, the more you will not be able to spend your money and you have enough.

[Divina Gupta]

Economist Mithali Nikore lives in Delhi and says a scarcity mindset doesn't just affect individuals, it shapes the economy as well.

[Mithali Nikore]

I would like to take you back to the 1970s and 1980s, and that was the time when India's saving rate was actually at its peak. We were almost at, you know, a 40% saving rate. And why was that? It was because, you know, in that era, people had not seen, you know, the kind of a, consumption opportunities that exist today, and B, because they were not sure about the future and the health of the economy. But in the last 10 to 20 years, particularly after the IT boom, the liberalization, privatization, we started seeing, you know, a new upper middle class and a very expanded upper class sort of forming in India who actually had real estate assets, who also had investments. And now we are seeing that, you know, that scarcity mindset is coming in where people across income brackets are thinking, hmm, is this actually the right time for me to spend? Is this the right time for me to invest? It's the older generations who are, of course, more conservative and, and they are the first ones to put off purchases. But now we're starting to see even younger people say, okay, you know what, maybe I will not take a consumption loan. Maybe I will not, you know, purchase this particular expensive fridge this year and I will just wait. And that's a very recent phenomenon because Amongst the younger generations, India has traditionally seen more a buy now, pay later mindset. So I think, you know, this impacts pretty much the entire macro economy and, but it plays out most crucially in the medium, small and micro enterprises. They are the ones who are rethinking, should I set up one more unit or not? Should I set up, try to expand to a new city, should I invest in exports or not? And all of these things require that risk taking ability, require them to probably take loans. So this status quoism is sort of then constraining growth in the investment landscape as well as in the real estate space.

[Divina Gupta]

But could government policies help here, especially cash transfer or tax cut benefits to ensure that people have a sense of financial security and can come out of this trap of scarcity mindset?

[Mithali Nikore]

So absolutely. And in fact India experienced that. If you, if you remember, September 20th was when, you know, the government of India reduced the goods and services tax, which is the indirect tax, main indirect tax in India. And it was like a huge boost to festive consumption spending which actually happens across income categories. And as a result we're actually seeing that, you know, the festive buying rates which were reported for automobiles for two wheelers and saw, you know, huge, huge boosts. Some people even said up to 20% increase in quarter on quarter sales.

[Divina Gupta]

But government policies can only go so much. So how can people break from this cycle? Elda Shafir, professor of psychologists from Princeton University, says contentment is the key.

[Eldar Shafir]

Well, the population we studied, those who really cannot finish the month. And so that's where a social safety net can make a big difference. And of course raising income and beyond that for people who have the minimum for a perfectly acceptable life and want more is to, you know, aim to be happy with what you have. That certainly if we're talking about well being, that's, that's the key. If you're living a minimally acceptable life and everything is well and you have the access to the food and medical and other leisurely activities that satisfy you, then not aspiring for too much more obviously is one key to living a more acceptable and more satisfying and happier existence.

[Divina Gupta]

Let's go back to Meeta, for whom it started with getting clarity.

[Meeta Gupta]

It took me a very long time, frankly to get out of that mindset. So one is to understand how money works. That's one part of it. But the larger context is about the mindset that you create around money. And when I started reading more about it, I realized that it is not only about saying that, oh, I've learned the financial tools. I know now how to do bam budgeting. I know how to know whether I should spend or should I be frugal or not. But it's more to be able to start working on your mind and start having gratitude as your way and more clarity around your money.

[Divina Gupta]

So from scarcity to abundance, it's a journey. Journey that requires careful planning, trust and mental freedom. For MEETA today, you've been listening to Business Daily with me, Divina Gupta. Thank you for being with us. To listen to more episodes, search for Business Daily wherever you get your podcasts. Till next time, Namaste.

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