Consumption as Nationalism: Crazy Rich Indians Fuel GDP Growth

India's recent consumption expenditure data for 2022-23, analysed by Brookings, paints a breathtaking picture: the vanquishing of extreme poverty! Imagine the scene: a nation once ensnared by deprivation and struggle now stands tall, its people liberated from the clutches of destitution. This remarkable achievement, fuelled by targeted government interventions, has catapulted India into a new era of prosperity. With rural growth surging and access to basic amenities soaring, the indicators speak volumes: from a mere 16.8% rural access to piped water in 2019 to a staggering 74.7% today. Similar strides have been seen in a national mission for construction of toilets and attempts to ensure universal access to electricity, modern cooking fuel, and piped water. 

Emergence of the 'Crazy Rich Indians'

Couple this with the phenomenal growth forecast for India’s GDP in 2024 by RBI. At close to 8% India surges far ahead of other major economies including US & China. India’s GDP growth this year is predicted to be over five times that of the USA and almost three times that of the global average at 7.6%. Principle driver for this growth, as per RBI and IMF, is the phenomenal surge in private consumption pattern over the last two decades from 58.4% in 2005 to 60.6% in 2023. 

In fact, in recent years, besides aiming to completely eliminate abject poverty, India has witnessed a remarkable surge in its affluent class, often referred to as the "Crazy Rich Indians." The latest data unveils a broader narrative of economic prosperity and rising discretionary spending among Indians across various income brackets. According to Goldman Sachs' 'Affluent India' estimate, the number of Indians earning more than $10,000 has tripled between 2011 and 2023, reaching a staggering 60 million. 

Expanding Consumption Landscape and Premium Brand Preference

The growth story extends beyond the affluent elite to encompass a wider segment of upwardly mobile urban Indians. Over the past 4-5 years, there has been a doubling or more of consumption units across different segments. For instance, the Indus Valley Annual Report compiled by Blume reveals that postpaid connections in India have risen from 54 million in financial year 2020 to 92 million in 2023, while Demat accounts have surged from 21 million in 2013 to a whopping 140 million by December 2023. Similarly, credit card users have grown from 47 million in 2019 to 95 million by October 2023, and broadband access, has widened sharply from 80 million in 2014 to 850 million in 2023.

This growth in spending power has fuelled a preference for premium brands across various sectors. Blume research says that from the apparel industry to FMCG and automobile markets, premium brands such as Zara, Nestle, Royal Enfield and BMW have outperformed mass brands like V-Mart, HUL, Hero Corp and Mahindra in terms of sales growth. 

India's Evolving Consumption Patterns and Economic Resilience

Kishore Biyani, the retail magnate, categorises this burgeoning class of Indians as India1 - the consuming class. Interestingly figures show this emerging class in India, with a per capita income of over 15 thousand dollars at par with those in the developed countries. With approximately 30 million households and 120 million people, India1 represents a significant market force driving consumption trends. Moreover, the potential of India2, comprising 70 million households with around 300 million people, presents untapped opportunities for economic growth and expansion.

The consumption trends of India1 reflect a remarkable shift in spending patterns. The Blume report reveals expenditure on beauty products has surged by 89%, dining by 70%, and food and beverages by 79%. This trend underscores the evolving preferences and lifestyle choices of Indian consumers.

Furthermore, the phenomenon of a K-shaped recovery highlights the resurgence of the Indian economy. Despite initial setbacks, sales of entry-level vehicles, real estate properties, and premium tech products have rebounded, indicating resilience and growth potential.

Future Prospects: India's Growing Affluence and Economic Transformation

Looking ahead, rising disposable incomes are poised to further drive India's consumption story, propelling the country's consumer sector to become a key driver of economic growth. With projections suggesting that around 100 million Indians will earn an annual income exceeding $10,000 by 2027, the country's consumer market is set to become the world's third-largest.

The vast consumption potential in India, evidenced by metrics such as travel, broadband access, credit card usage, and mutual fund investments, underscores the transformative impact of India's burgeoning affluent class on the country's economic landscape. As India continues on its trajectory of growth and prosperity, the rise of the Crazy Rich Indians symbolises not just opulence but also the promise of a thriving economy driven by consumer demand and aspirations.