Consumption in India is expected to grow by $1.8 trillion over the next decade, a growth rate of approximately 6% annually in real terms, according to a research paper by McKinsey Global Institute (MGI). Mint takes a look:
What does the research paper say?
According to the research paper, Asian consumers will account for half of the global consumption growth in the next decade. Densely populated Asian countries, with hyper-connected consumers, will likely offer a $10 trillion opportunity over the next decade. Moreover, globally, one of every two upper-middle-income and above households is expected to be in Asia, and one of every two purchase transactions is likely to be made by consumers in the region, MGI said in its ‘Beyond income: Redrawing Asia’s consumer map’ research paper, made public recently.
How will India’s consumption grow?
MGI expects consumption in India to grow by $1.8 trillion over the next decade, a growth rate of approximately 6% annually in real terms. India’s total consumption as of 2020 was estimated at around $1.9 trillion to $2 trillion. The estimates come as India is still reeling from the impact of the covid-19 pandemic that led to strict lockdowns and restricted mobility in Asia’s third-largest economy. “Growth outcomes will depend on the shape of the recovery from the pandemic and other macroeconomic factors in different geographies," MGI said.
But how would Asia’s rise affect India?
Nearly 55% of India’s population could be consuming class—consumers who spend upwards of $11 per day—by 2030, up from the current 24%. A growth in income levels could push India to contribute 27% of Asia’s consuming class. The share of consumers in the two highest income tiers—those spending $30 to $70 and more a day—could double to 20% by 2030 in India.
How will rise in data usage affect India?
Given the significant penetration of data and connectivity in these markets, digital natives, those born between 1980 and 2012, are expected to account for 40% to 50% of Asia’s consumption by 2030. In India, these digital natives are expected to account for at least 50% of consumption in the same period. A growing consumer class and access to data would push more Indians to consume digital content and shop online, leading to the creation of more “digital eco-systems" in the form of super apps and hyper-local delivery models.
What does it mean for households, women?
The next decade is also set to bring shifts in the concentration of family sizes. While the average size of households is shrinking across Asia, it has declined 16% from 5.5 to 4.5 people in India from 1999 to 2015. Also, MGI estimates suggest that increased female participation represents a $1.4 trillion gross domestic product opportunity in India. But this needs “structural interventions" as female labour participation decreases, and the gender pay gap increases. This has been further accelerated by the covid-19 pandemic.