The great Indian middle class and rise in Indian consumerism

McKinsey global has released it’s India consumer research and here are a few key insights from the report:

  • Indian income will triple over the next two decades.
  • Over the next two decades, the country’s middle class will grow from about 5 percent of the population to more than 40 percent and create the world’s fifth-largest consumer market.
  • In 2005 private spending reached about 17 trillion Indian rupees($372 billion), accounting for more than 60 percent of India’s GDP, so in this respect the country is closer to developed economies such as Japan and the United States than are China and other fast-growing emerging markets in Asia.
  • India remains the least urbanized of the emerging Asian economies. Today only 29 percent of Indians live in cities.

India shining:

  • Extreme rural poverty has declined from 94 percent in 1985 to 61 percent in 2005
  • In 1985 93 percent of the population lived on a household income of less than 90,000 rupees a year,by 2005 that proportion had been cut nearly in half, to 54 percent.
  • The growth that has pulled millions of people out of poverty is also building a huge middle class that will be concentrated in India’s urban areas.
  • If India can achieve 7.3 percent annual growth over the next 20 years, 465 million more people will be spared a life of extreme deprivation
  • About 400 million Indian city dwellers—a group nearly 100 million people larger than the current population of the United States—will belong to households with a comfortable standard of living.

india shining

Consumer spending in India:

Discretionary spending in India will rise from 52 percent of total private spending today to 70 percent in 2025.

  • By 2025 India’s wealthiest citizens will total 24 million, more than the current population of Australia. By that year too, India’s affluent class will be larger than China’s comparable segment, projected at about 19 million people
  • Spending on purchases that improve the economic prospects and quality of life of a person or family—health, education, transport, and communications—will soar and eventually command a greater share of consumption than they do elsewhere.
  • Despite India’s fondness for cricket and “Bollywood” movies, recreational products and services will take a smaller slice of household spending there than in other countries.
  • Transportation, already the largest category of expense after food, will take a bigger portion of household budgets in coming years, exceeding its share in all of our benchmark countries. The highest growth will come from car purchases. Categories such as clothing and household goods are expected to post slower annual growth relative to overall consumption

What does this means for marketers?

By 2025 India’s wealthiest citizens will total 24 million, more than the current population of Australia.

India will witness the rapid growth of its middle class—households with disposable incomes from 200,000 to 1,000,000 rupees a year. That class now comprises about 50 million people, roughly 5 percent of the population.

  • Today 57 percent of private spending is spread across rural areas, but by 2025 cities will command 62 percent of the country’s spending power.
  • In absolute terms the country’s urban population will expand significantly, from 318 million today to 523 million in 2025.
  • The shift in spending power from the countryside to the cities will place the bulk of India’s private consumption within easier reach of major companies

Needless to say, India is shining, stock market is on a joy ride and now we need more Indian startups to put the icing on the cake. So all ye startups, look at the opportunities that lies ahead and make your mark.

What says?

Download the report (8MB). snapshot

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