Executive Summary

India is on the cusp of a tremendous opportunity for both economic progress and improvement in the general well-being of its citizens. India is currently the world’s sixth largest economy and one of the fastest-growing large countries, with an annual gross domestic product (GDP) growth rate of 7.5%, a momentum that is expected to sustain over the next decade. Domestic consumption, which powers 60% of the GDP today, is expected to grow into a $6 trillion opportunity by 2030. This consumption growth will be supported by a 1.4 billion strong population that is younger than that of any other major economy. Household savings have historically been high as thrifty and cautious Indian families put away more than a fifth of their incomes for a rainy day. This buffer provides support to domestic consumption expenditure even through challenging cycles in economic activity.

The vision for the future of consumption in India is anchored in the growth of the upper-middle income and high-income segments, which will grow from being one in four households today, to one in two households by 2030. At the same time, India will also lift nearly 25 million households out of poverty, to reduce the share of households below the poverty line to 5%, down from 15% today. Thus, India represents a relatively broad-based pattern of growth and benefit sharing, in contrast to the global scenario of increasing inequality wherein the richest 10% of the population is capturing an increasing share of national incomes and, consequently, wealth.

Since the beginning of the journey of liberalization in 1991, the average Indian consumer has witnessed an exponential growth in the options available in every consumption category. One of the most visible changes has been in the car industry that went from three major models in the mid-1990s to more than 30 today. The liberalization era has also witnessed a massive growth in the IT/ITES¹ sector, that today employs nearly one-fourth of the 12-13 million employees in India’s organized private sector. Growth in IT/ITES jobs has been an engine for job creation and has represented an aspirational stepping-stone for numerous young Indians over the past 20 years.

The generational cohorts that were in their peak-consuming years during the past two decades (30-50-year-olds today) were born between the 1970s and the 1980s. These cohorts still carry with them memories of a more constrained era when consumption options were fewer and thrift was a greater virtue. Over the next decade, one of the biggest changes in India will be the coming of age of liberalization’s true children–the nearly 700 million people born through the late 1980s to the 2000s². These individuals will have grown up in a more open and confident India and will not carry the cultural or economic baggage of their predecessors. This is a generation on the move that aspires to a materially better life, backed by the ability to spend and make it a reality.

One of the most challenging and exciting implications for companies in India is the opportunity to shape consumption patterns–in terms of categories consumed, brands purchased or ways of accessing products and information. Companies will need to look beyond Western assumptions and rules of doing business. India’s unique combination of preferences, aspirations and prudence will require innovation specifically for this market. Related, future consumption growth will come from the many Indias–from the rich and densely populated metro cities and also from the geographically dispersed thousands of developed rural towns whose aspirations have begun to converge with those of urban India. Businesses will need to tailor offerings to serve these aspirations, while innovating to solve for challenges (such as access to physical and digital infrastructure) that differentially influence consumption choices across the many Indias.

India has historically leapfrogged generations of technologies–the jump straight to mobile phones bypassing the stage of widespread landline connectivity being an oft-cited example. The Indian business landscape now abounds with numerous other indications of a similarly varied path to growth. Digital entertainment and subscription video have eliminated the need for owning personal media. E-commerce is taking a share from traditional retail at a speed that “modern” organized retail has struggled to emulate. Youngsters in crowded cities are embracing alternative forms of transport before car ownership. Mobile-based payment models have acquired greater acceptance in a shorter time than credit cards did over the past two decades.

A massive increase in internet penetration will lead to more than a billion internet users in India by 2030. Online connectivity, and the resultant access to information, is proving to be a key driver of differences in aspiration and the desire to spend and upgrade consumption, even among people at similar income levels. Those who are more connected have a keener sense of what is “desirable” and are willing to invest in more comfortable living–including a greater spend on household durables and services. As a vast majority of India is connected over the next decade, this pattern will become a driver of overall consumption growth.

India is often compared to China, the other Asian behemoth. The Chinese economy is structurally different, with a lower share of consumption expenditure in the GDP at about 40%, and a much higher rate of household savings at 37%. However, in terms of the relative choices made by households across different elements of the consumption basket, India most closely mirrors China and looks very different from the patterns of other large economies. Both countries are very similar in their high share of mobile powered internet connectivity, as opposed to other modes of access. Chinese business model innovations, ranging from mobile-based fin-tech, artificial intelligence powered e-commerce to ecosystems at the centre of a wide variety of services, provide very relevant templates for Indian businesses to learn from.

The coming decade presents numerous opportunities for businesses to serve the growing needs and demands in India. Richer, younger, more confident and more connected consumers will pave the way for tremendous innovation in products, services and business models. To unlock the full potential of this opportunity and ensure equitable growth, the private sector and governments will need to proactively address three critical challenges:

1. Skill development and future-focused employment generation will be critical to direct the potential of India’s young workforce. As nearly 10-12 million working-age persons get added to India annually over the next decade, it will be critical to provide them with gainful and more formal employment and reduce the skills-gap that exists today.
2. Social and economic inclusiveness of rural India is also a key imperative, especially as connectedness creates aspirations. Currently, multiple “access” barriers, such as poor physical and digital connectivity and lack of financial inclusion, constrain the spend and well-being of rural dwellers. Innovative efforts by businesses and governments, like the impetus to cashless, digital transactions, can accelerate the inclusion of rural India.
3. A broad set of stakeholders will need to evaluate and respond to the challenges of creating a sustainable and healthy future through better access to healthcare, reduction in pollution and better urban planning to reduce congestion.

Companies, governments and civic society have the opportunity of a lifetime to advance responsible consumption and shape positive outcomes for India over the next decade.

Nikhil Prasad Ojha is a partner in the Strategy practice in Bain's Mumbai office. He is also a member of Bain's Consumer Products and Retail practices. Zara Ingilizian is Head of Future of Consumption and a member of the Executive Committee at the World Economic Forum.

1. IT: Information Technology, ITES: Informational technology enabled services referring to processes that can be enabled by IT, such as finance, human resource management, health care, telecommunication or manufacturing

2. Persons in India as of today, born 1986 onwards, as per national and UN statistics in India in 2030: The Future Demographic, available at https://www.euromonitor.com/india-in-2030-the-future-demographic/report