India Poised To Be Third Largest Consumer Economy
In less than a decade, the world's widget makers, entertainers, and beauty products will be focused on three core economies: the United States and China, of course, and in third place and gaining fast: India. They're young. They're the poorest of the big emerging markets, so have lots of momentum on their side. And they're tech savvy smart. India is the new China. If you have something to sell, India is now an on-radar must
The Boston Consulting Group (BCG) said in a report released on Tuesday titled The New Indian that the country will be the third largest consumer market in the world by 2025.
Rising incomes is the biggest driver here. Although poor, income distribution is evolving even as the population of one-percenters rises. In 2005, some 44% of the country were considered struggling, with 42% just getting by. Today, the extreme poor rural Indians account for 31% while greater number of them have moved up the ladder, accounting for 45% of the working class. Between 2005 and 2016, what BCG refers to as the "aspirers" -- or the upwardly mobile -- went from 8% of Indian households to 15% and by 2025, 20%. Affluent Indians have gone from 3%, or roughly seven million households back in 2005 to 17 million last year. That is seen rising to 33 million by 2025.
And for the super elite, those who are buying Tata Motors' Jaguars and Land Rovers, the numbers went from 3.1 million in 2005 to 6.5 million last year. By 2025, it will more than double to 15.8 million, based on BCG analysis.
For businesses, these new consumers, and shifting consumer tastes, have big implications for companies looking to build their business in India.
BCG's report said that Indians are no longer as fascinated as they once were with foreign goods. Some 60% prefer and are willing to pay extra for Made in India. They are increasingly interested in learning about their own local roots.
Trends such as family generations splitting up and getting their own homes has been a factor in big cities like Mumbai, but as adult children move out of their parents homes, they need apartments.
Women in India are also becoming more of a force. Women rights are becoming front and center in India, and women are receiving better healthcare than they ever did, and more relevance in the media. The most important factor is educational opportunity, BCG says. From 2005 to 2014, the enrollment rate of girls in secondary education went from 45.3% to 73.7%. It's now greater than that of boys in the high school level.
Younger women have bridged the gap in higher education too. Their enrollment rate is 20% versus 22% for young men. This shift will have a broad impact on societal factors long term, such as workforce demographics and economic independence.
Long term businesses in India may have to "fundamentally rethink their business models, including product offerings, consumer engagement and marketing" to the Indian consumer, the consultant firm believes.
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