India is on track to become the world’s consumption capital, surpassing many large economies, according to a report by Angel One and Iconic Asset. The country’s private consumption is growing rapidly, currently contributing 56% to the nation’s GDP. With India’s economic growth accelerating, the report predicts that total consumption in the country will double by 2034. The key factors driving this surge include rising numbers of households, increasing workforce participation, and higher discretionary spending by consumers.
Household Growth Leading to Spending
One of the main reasons for India’s rising consumption is the rapid increase in the number of nuclear families. Household growth is now outpacing population growth, resulting in higher per-family spending. As smaller families become the norm, the report highlights how more households are contributing to India’s overall demand for consumer goods and services.
Additionally, India is poised to lead the global workforce expansion, which will further boost economic activity. As more people enter formal jobs, their purchasing power will rise, allowing them to spend more on both essential and non-essential items. This expansion is expected to significantly increase demand for consumer products, services, and lifestyle experiences across India.
Massive Spending Potential in India
India’s impressive savings track record is another key driver of its consumption boom. Between 1997 and 2023, Indian households saved a total of $12 trillion. This figure is projected to grow tenfold, reaching $103 trillion by 2047. With larger savings, consumers are expected to increase their spending power, further enhancing the country’s consumption capacity.
Recent tax cuts announced in the Union Budget will also play a role in boosting consumer spending. The report estimates that the Rs 1 lakh crore saved through tax reductions could lead to an additional Rs 3.3 lakh crore in spending, adding 1% to India’s GDP growth in the near term.
Rapid Growth in Discretionary Spending
As incomes rise in India, discretionary spending is expected to increase at a faster rate than essential spending. Discretionary spending includes purchases of items such as electronics, clothing, jewellery, and entertainment. The report points to historical examples from countries like the United States and China, where discretionary spending surged during periods of rapid income growth and economic expansion.
The report further suggests that India could experience a similar trend, with more people spending on lifestyle products, luxury items, and unique experiences as their incomes rise. This shift in spending patterns is expected to be a key driver of India’s consumption growth over the next decade.
Opportunities for Organized Retail
Despite the rise of modern retail chains, India’s traditional Kirana stores still dominate the retail market, accounting for 92% of the country’s retail trade. However, the report indicates that organized retail chains could capture a larger share of the market by expanding their operations. This gradual shift could offer more choices to consumers while boosting the overall consumption economy.
Gen Z Consumers to Lead India’s Spending Boom
India’s young population, especially Gen Z, will play a central role in driving the country’s consumption growth. India has more Gen Zers than the entire population of the United States, making them a powerful consumer demographic. According to the report, by 2035, every second rupee spent in India will come from a Gen Zer. This younger generation’s spending habits and preferences are expected to shape India’s position as the world’s leading consumption hub.
With a growing economy, expanding workforce, and young, tech-savvy consumers, India is well-positioned to emerge as the global consumption capital in the years to come.
