Rising income, digital shift to help India grow consumption by $1.8 tn in next decade: McKinsey

Consumption in India is expected to grow by $1.8 trillion over the next decade, the latest report by McKinsey Global Institute shows. It suggests Asia will dominate the consumer markets in the next decade. Asian consumers are expected to account for half of the global consumption growth in the next 10 years, which is equivalent to a $10 trillion opportunity, says the report.

India will see a major rise in high-income households and a shrinking household size in the next few years. This could lead to India having the third-largest number of high-income households globally, after the United States and China by 2030.

Notably, the average size of households is shrinking across Asia. India, too, has seen a 16 per cent decline -- from 5.5 to 4.5 persons -- from 1999 to 2015. As per the report, there could be over 60 cities with over 1 million upper-middle-income households by 2030.

Most of them will be in China, India, and Indonesia. India's financial capital Mumbai will likely be the fourth-ranked city in Asia for high-income households, the report shows. Globally, too, one of every two upper-middle-income and above households is expected to be in Asia. This means that one of every two purchase transactions are likely to be made by consumers in the region.

The Mckinsey report estimates that by 2030, up to 55 per cent of India’s population could belong to the consuming class. This means they'll spend over $11 on average each day. As more consumers attain higher income levels, India may represent 27 per cent of Asia’s consuming class by 2030.

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"It is time for companies to redraw their consumer growth map of India and Asia as a whole. Companies need to understand how growth may play out in their markets and redraw their map of growth," the report highlights.

The share of consumers in the two highest income tiers of the consuming class (spending $30 to $70 and $70 plus a day) could also double from 10 per cent today to 20 per cent by 2030, the report adds.

It also estimates that consumption by those aged above 60 may grow 1.6 times faster than that of the Indian population as a whole.

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The rise of digital natives will represent at least 50 per cent of consumption in India by 2030. "Across Asia, Gen Z is eager for new experiences and ‘always on’ (30 per cent of Gen Z spends more than 6 hours a day online)," the report reveals.

The rise in ‘super apps after forays in e-comm space by companies such as Reliance, TATA, Flipkart and Paytm will also lead to big convergence.

The report also reveals 56 per cent of Indian consumers, the most of nine polled countries, are willing to share data in exchange for better personalisation outcomes. Around 88% of Indian consumers claim to have changed consumer behaviour out of concern for climate change, which is the most of any polled country, the report highlights.

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