How India Spends: A Story of Aspiration in Motion

If an economy’s character is revealed in the way its citizens spend, then India is in the midst of a quiet revolution. It is not loud, not sudden, and not directed from above. Instead, it is unfolding through millions of incremental choices, each small in isolation but transformative in aggregate.

Private consumption accounts for 56% of India’s GDP (Source: FY 2024-25 (1st Advanced Estimates) GDP data as per National Statistical Office (NSO)) a share that places households at the centre of the country’s economic narrative. Yet the true force of this spending power does not lie in macro aggregates; it lies in the reshaping of consumer behaviour. Economic change begins, as it often does, in kitchens, shops, smartphones, and travel decisions.

Since 2008, India’s per-capita income has risen roughly 2.7× (Source: IMF World Economic Outlook Data). The pattern that follows such an increase is well documented in development economics: households move from essential purchases to higher-quality goods and eventually to discretionary consumption. India is tracking this trajectory in its own distinctive way, driven as much by technology and demography as by income.

Urbanisation adds another strand to this story. By 2030, about 40.9% (Source: NASSCOM, Industry Reports by Redseer Research & Analysis as available on www.meesho.com & www.duroflexworld.com) of Indians may live in urban areas. But unlike many countries where urbanisation is concentrated in mega-cities, India’s growth is polycentric. Smaller cities are emerging as consumption engines in their own right, enabled by improving infrastructure and expanding distribution networks.

The most dramatic shift, however, comes from digital access. With the prospect of 99–114 crore (Source: NASSCOM, Industry Reports by Redseer Research & Analysis as available on www.meesho.com & www.duroflexworld.com) internet users by FY2030, India is expected to become one of the most connected consumer markets in the world. Digital platforms have eroded the traditional barriers of geography and availability. A household in a tier-3 city can now compare products, read reviews, access financing, and make purchases with the same ease as a consumer in Mumbai or Delhi. Consumption has become democratised.

This has accelerated what marketers describe as premiumisation. Categories that once saw predictable, low-intensity growth are now witnessing a tilt toward higher-value propositions. Premium beauty outpaces mass-market skincare. SUVs, now 65% of new car sales (Source: SIAM, Jefferies) reflect both rising affluence and shifting preferences. Premium hotels command higher room rates than they did just a few years ago. Such shifts signal a society gradually renegotiating its relationship with quality, status, and self-expression.

Economists would place this within the context of the S-curve of consumption (Source: NITI Aayog, CEIC, CRISIL, SIAM, RBI, KPMG, Internal Research). At early income stages, consumption grows slowly; once incomes cross certain thresholds, demand accelerates; eventually, consumption broadens and matures. India appears to be entering the second phase, where aspiration amplifies purchasing power rather than merely following it.

The R.I.S.E. framework - Reach, Intermediates, Spend Up and Experience considered as a lens through which the diverse strands of India’s consumption landscape can be viewed. It does not outline a process or method; instead, it organises the consumption universe into four broad themes: categories shaped by penetration, those enabled by platforms and intermediaries, those influenced by premiumisation, and those centred on services and experiences.

Historical data (CY 07- CYTD 25) from consumption indices (Source: NSE) demonstrates that this segment has moved through multiple cycles. This reinforces a simple truth: structural themes can be compelling but still require careful navigation. Valuations, diversification, and disciplined research matter as much in thematic investing as in any other strategy.

India’s consumption story is ultimately one of expectations. Not the market’s expectations, but those of households - expectations of convenience, quality, and mobility; of better homes, better products, and better experiences. Such expectations, once formed, rarely recede. They adapt, evolve, and tends to pull the economy along with them.

Union Consumption Fund seeks to interpret this long arc of change, not by attempting prediction, but by maintaining perspective. India’s consumers are not merely spending more; they are spending differently. And in those differences lie the contours of the country’s next phase of economic development.

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The article is written by Harshad Patwardhan, Chief Investment Officer at Union AMC.

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