| 22 | | 23 | CONSUMER ECONOMY India’s consumer economy is poised to get a booster dose as it grows in size. MIDDLE CLASS CHECKS IN For any economy consumers are key to sustainable growth. And within this cohort, the middle class, equipped with surplus incomes, are a critical stakeholder. On both counts, India has tended to come up short for most of the first seven decades since it attained Independence. The good news is that change is in the air. Anecdotally, we hear how the consumption story is spreading beyond India’s metros to Tier-1, Tier-2 and even Tier-3 towns. Now new studies confirm this trend. In fact, the numbers are staggering. According to PRICE (People’s Research on the Indian Consumer Economy) report released earlier this year, India’s middle class would nearly double to 715 million by 2030-31. It doesn’t stop there. The report goes on to argue that the middle class would grow to a massive one billion by 2047—nearly three times the present population of the United States. Impressive no doubt, but it is not very surprising and largely an outcome of the ongoing dramatic socio-economic makeover, including banking 430 million people and pulling scores out of poverty. According to the 2022 report on global poverty by the United Nations Development Programme (UNDP), the designated UN body to lead the fight against poverty across the world, India successfully lifted 415 million out of poverty in 16 years ended 2021. In several ways the declining trends in poverty and the projections of a rapid growth in the middle class define a new narrative for India: It is a case of the economy trading up, slowly but steadily. This is also apparent in growing aspirations, the rapid growth in frictionless payments using Unified Payments Interface (UPI), e-commerce and accessing utilities online. The poor—the largest cohort for the last 75 years— escaping poverty, will gradually ascend the social ladder to join the middle class—which in any case has got many layers and is not a homogenous entity. The flip side of this is that the middle class—the force multiplier for any consumer economy--is emerging as the biggest demographic segment. A structural makeover of this magnitude is rare and has huge attendant implications—especially for the polity of the country and its consumer economy. The only other example that comes to mind is China. Exactly why countries and foreign companies are queueing up to invest in India. They are betting on a future when the middle class would grow several times over and generate unprecedented purchasing power and expand the consumer economy like never before. Morgan Stanley, the global financial services firm, acknowledged this formally in their analyst report when they argued that the next decade was India’s. Differing speeds The larger story of the middle class however masks the fact that this large cohort is not homogenous. In fact, it is a story of differing speeds. The latest Indus Valley Report (2023) published by Bloom Ventures, a venture capitalist firm, captures it best when it unpacked India’s demographic story based on per capita incomes. Broadly, it defined India-1 of 120 million people ($12,000 per capita income); India-2 of 100 million people ($3,000 per capita income); and, India-3, the largest cohort, of 1.2 billion people ($1,500 per capita income). The report adds that India-1 includes 25 million people with a per capita income of a very impressive $35,000— comparable to any developed country. Clearly, it is the story of a country operating at different speeds and needs. As of now, the India’s consumer story is still based on the power of few: It is firing on one cylinder, India-1. The good news though is that this scenario is poised for change.
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