The New Indian Consumer
The Rise of Consumerism and Its Impact on India
“India’s evolving consumer landscape reflects a shift from necessity to lifestyle, where digital influence and a growing middle class drive the future of consumption.”
Over the past five years, India’s private consumption growth has remained modest despite strong GDP growth, constrained by factors such as the pandemic, high inflation, and poor agricultural output.
India’s consumption patterns have evolved, with the share of food in the consumption basket dropping from 60% to 46% in rural areas and from 48.1% to 39% in urban areas between 1999-2000 and 2022-23 . There has been a noticeable increase in spending on luxury and premium goods, particularly among the middle-income class . This trend is expected to continue as disposable incomes rise.
The following key metrics highlight the anticipated trends and shifts in the consumer landscape: -
- Projected economic growth (2024): 7.6% to 7.8%
- 47% Growth in India’s middle class by 2030
- 50% Population expected to be in upper middle / high income category by 2030
- 40% Purchases will be highly digitally influenced by 2030
- 40% Indians will be urban residents by 2030
- Rural per capita consumption will grow to 4.3X by 2030
Poverty reduction in India has shown remarkable progress, with rural poverty decreasing to 7.2% in 2022-23 from 25.7% in 2011-12, and urban poverty falling to 4.6% from 13.7% over the same period . This significant decline in poverty is complemented by a notable rise in household consumption, which nearly doubled to $2.1 trillion in 2023, surpassing growth rates seen in China, the US, and Germany . Although private consumption grew by 4% in the quarter ending March 31, 2024 – an improvement from 1.5% growth in 2023 – it remains below the pre-pandemic average of 6.3% in 2019 . Looking ahead, consumption is projected to grow by 6.1% in 2025 and 6% in 2026 , indicating a positive outlook for economic expansion and continued progress in poverty alleviation.
While urban households have traditionally outspent rural ones, the gap is narrowing , with rural households now catching up, especially in spending on discretionary goods such as automobiles, electronics, and services.
The share of spending on education has declined, particularly in urban areas, where it has dropped by 2.43% since 2009–2010 . This reduction could impact future employability and widen income disparities. Meanwhile, rising health expenditures are placing financial burdens on households, potentially limiting their ability to spend on other categories.
India’s growth has traditionally been driven by consumption, aligning with neo-Keynesian theories where aggregate demand boosts output. However, recent data shows a slowdown in private final consumption expenditure growth, prompting questions about India’s shift from a consumption-driven economy. Instead, capital expenditures and investments have become key drivers, with a significant multiplier effect on GDP .
The government’s recent budget includes policies aimed at boosting agricultural productivity, job creation, and manufacturing. These measures are expected to address inflation and enhance consumer spending, particularly in rural areas. The post-COVID period has seen significant changes in consumer behaviour; consumers are spending less on food and more on leisure and lifestyle products . The appetite for processed foods and durable goods, like electronics, has surged, indicating a fundamental shift in consumption priorities as incomes rise and urbanization progresses.
As India approaches the 2030s, the consumer landscape is set to transform dramatically. A more lifestyle-conscious, tech-savvy, and brand-aware consumer will emerge, particularly from India’s growing middle class. This group, marked by a “try-everything-once” mentality, will drive consumption . Younger generations, influenced by globalization and social media, will prioritize experiences over savings. Connectedness is set to drive consumer spending habits by enhancing digital interactions, personalizing experiences, and offering unparalleled convenience, which collectively shape how consumers discover, engage with, and purchase products.
Opportunities surely await in the luxury goods, digital and e-commerce, urban infrastructure, health and wellness, education technology, processed foods, and financial services sectors.
As economies mature, consumption’s role as a growth driver diminishes, as seen in countries like China, Japan, South Korea, and the EU . This is why the Indian government is now focusing on high capital expenditure to boost investment. However, with over 55% of the population under 30 , India must also leverage its youthful demographic by implementing fiscal measures to increase disposable incomes, sustaining its advantage in consumption-led growth.
While overreliance on consumption may not be ideal, it remains a critical growth driver due to India’s large and youthful population. A balanced approach that integrates both consumption and investment will be crucial to ensuring long-term economic development. As India’s consumer culture continues to evolve, it offers vast opportunities for innovation and engagement, ultimately paving the way for a more prosperous future.
