India's consumer market presents a $6 trillion opportunity in 2030

04 February 2019 Consultancy.in

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 released 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.

Evolution of the household-income profile in India

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.

Population growth across urban and rural India

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.

Demographic distribution of the Indian population

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. 

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Public and private innovation are driving India's substantial digital economy

01 April 2019 Consultancy.in

New analysis from global management consultancy McKinsey & Company has reinforced what many experts have been indicating in recent times, that India is amongst the largest digital economies in the world. On a number of metrics, India is second only to China in terms of digital consumption.

The analysis comes against the backdrop of reports from a number of major consulting firms about India’s rapidly digitalising economy. In 2017, the Boston Consulting Group placed India’s population of online users at approximately 400 million, and predicted that it would reach 850 million by 2025.

Since then, experts have focused on what the emergence of such a large digital market means for various sectors, and how they are likely to grow and evolve in this context. McKinsey’s latest study offers a comparative analysis of India’s digital market against other major economies in the world.

India's global digital position

The highlight of the report is the role that the Aadhaar initiative from the Indian government has played in the development of this digital economy. Aadhaar was launched in 2009, and is essentially a digital identity mechanism that has registered as many as 1.2 billion people in accordance with their biometric information. 

The presence of such a digital identity has spelled growth for a number of other sectors that have fed off of this substantial database. The digital banking segment is one example. By the start of last year – nine years after the introduction of Aadhaar, nearly 900 million bank accounts were linked to Aadhaar information.

Not only does this represent monumental growth over less than a decade, but the number also nearly doubled since the previous year, when the number of linked bank accounts stood at just under 400 million. The digital identity database generated under Aadhaar has grown into the largest of its kind in the world.

Global digital adopters

The report attributes the overall digital growth in the country to a number of other government initiatives as well, including the Goods and Services Tax that was established in 2013, and has created a unified and harmonized database for over 10 million firms that pay indirect tax to the government.

Consequences of this expansion in the digital sphere have spread far beyond the sectors most directly affected, and India has become the second largest digital economy in the world behind only China on a number of metrics. These include the number of application downloads as well as the number of wireless phone subscribers.

The latter has been the result of the Reliance Jio initiative, which has tremendously increased the accessibility of mobile data by offering extremely cheap data plans across the urban and rural landscape. The number of internet subscribers has also grown to the second largest in the world as a result, currently at 560 million according to McKinsey.

Falling data prices in India

Increased prosperity has also led to a boom in the number of smartphones being purchased in India, currently at nearly 355 million in India, behind only China. The same global position is applicable when comparing the volume of social media engagement in India. Alongside government initiatives, the report attributes this scenario to innovation in the private sector as well.

“Global and local digital businesses have recognized the opportunity in India and are creating services tailored to its consumers and unique operating conditions. Media companies are making content available in India’s 22 official languages, for example,” says the report.