India is set to overtake large economies and become the world’s consumption hub, a report by Angel One and Iconic Asset has stated. The country’s fast-growing consumer base and economic growth are major drivers of this shift.
Consumption to Double by 2034
Consumption now represents 56% of India’s GDP and is the fastest-growing part of the economy. The report estimates that India’s consumption will double by 2034, driven by its fast-growing consumer base.
One of the key impulses behind this growth is the increase in nuclear families that is driving household expansion at a faster rate than overall population expansion. This trend is heavily contributing to consumption demand in different sectors. Moreover, India will be at the forefront of world workforce growth, further consolidating its economic standing.
India’s Savings Set for a Tenfold Increase
The report points out that India’s savings are likely to experience a remarkable increase in the next 25 years. From the financial year 1997 to 2023, India’s overall savings were USD 12 trillion. In 2047, it is likely to increase tenfold to USD 103 trillion. The increase in savings will unlock enormous potential for higher consumption and have a large impact on the economy.
Tax Cuts to Drive Economic Growth
Recent fiscal reductions brought on by budgetary tax cuts are likely to release Rs 1 lakh crore, potentially fueling an extra Rs 3.3 lakh crore in consumption. The enhanced spending can lead to an increase in India’s GDP by 1%, as per the report.
India to Adopt US and China’s Consumption Trends
The report makes comparisons with economic trends in the United States and China. It observes that in periods of economic and income expansion, discretionary expenditure in both nations exceeded non-discretionary expenditure. India is likely to follow the same pattern.
“US consumption expenditure grew 10X during a period of sharp increase in per capita income. India can see the same growth in consumption as per capita income increases,” the report says.
Fastest-Growing Sectors in Discretionary Spending
Consumer electronics, clothing, accessories (jewelry included), and experience-oriented services will be the fastest-expanding discretionary consumption categories. Disposable income growth and changing consumer lifestyles will drive demand for these industries.
Retail Industry Ready for Disruption
Even with India’s fast-paced economic growth, 92% of retail trade continues to pass through conventional Kirana stores. This offers tremendous potential for modern retail formats to grow and increase their market share.
Gen Z to Drive Future Consumption Growth
India’s Gen Z consumer base is bigger than the United States’ population. In 2035, every alternate rupee spent will be by a Gen Z consumer, hastening the consumption growth story of the country even further.
