India's consumer market presents a $6 trillion opportunity in 2030
In light of a rapidly growing economy and a significantly favourable demographic composition, India’s consumer market has the potential to grow to a staggering value of $6 trillion by 2030, according to a new report by management consultancy Bain & Company in collaboration with the World Economic Forum.
India’s GDP has been growing at a steady pace in recent years, prompting economists at large to put forth superfluous predictions about the country’s future. Alongside touting India as a driver of economic growth in Asia, some analysts expect the country to be the second largest economy in the world by 2050.
Currently, India stands in sixth place across the globe in terms of GDP, although its growth rate far outpaces many of the economies ahead of it. The country’s annual average GDP growth rate stands at 7.5%, and is likely to stay in and around these levels for the next ten years at the very least.
Central to this growth story is India’s massive population, which represents one of the largest markets in the world as economic prosperity increases the overall income denomination and the size of the middle class. According to Bain, the domestic consumer market generates as much as 60% of the GDP.
This segment of the economy is only expected to grow further, given that India’s urban population and middle class are both expanding at unprecedented rates. At the upper end of the spectrum, Bain expects high-income and upper-middle income households to increase from their current share of 25% of all households to 50% by 2030.
Growth in these segments necessarily increases the consumption levels in the country, a claim that is endorsed by several other firms. According to a Boston Consulting Group report from 2017, the consumer spending market in India could reach a value of $4 trillion by as early as 2025.
Big Four accounting and advisory firm Deloitte came out with an even more short-term prediction, anticipating that the consumer market would surpass $1 trillion by 2021. Bain’s estimates are more or less consistent with these claims, placing the value of the consumer market at $6 trillion by 2030.
At the other end of the spectrum, Bain expects that the growing consumer market will also benefit the lower-income households in a substantial manner. The growth till 2030 is expected to bring as many as 25 million households out of poverty, bringing the share of households below the poverty line from 15% to 5%.
The consulting firm also expects an increase in urbanisation over the next decade. Where 51% of India’s population currently lives in under-developed rural areas, a figure that will drop to 44% by 2030. The most significant corresponding increase will come in relatively under-developed urban centres, which will host 27% of the population as opposed to 23% now.
The share of the Indian population in “boom towns” and metropolitan cities will, meanwhile, increase by 1% each according to the report. In terms of the reasons for this growth, Bain argues that the primary driver of growth is India’s relatively young population compared to other developed economies.
Milennials are the largest population segment in India, comprising 37% of the country – a figure that is expected to remain steady up until 2030. This age group is digitally connected and has a propensity to consume, which makes them an essential component of India’s growth over the next decade.
