Context:

• World Economic Forum has released a report titled ‘Future of Consumption in Fast-Growth Consumer Market’. The report contends that with the current pace of development, India would become third largest consumer market in the world by 2030.

About

• The report builds on in-depth consumer surveys conducted across 5,100 households in 30 cities and town in India and draws from over 40 in-depth interviews with private and public-sector leaders.
• It lays out seven critical predictions on a vision for consumption and also a call-to-action for multi-stakeholder collaborations to build an inclusive future for India.

What makes India a strong contender for third largest consumer market by 2030 as per report?

India’s economy has some structural strength that have enabled robust economic growth and allowed the economy to be relatively resilient to the vagaries of global economic patterns:

• Domestic consumption driven economy: Nearly 60% of India’s GDP is driven by domestic private consumption, as compared to 40% in China. Hence the economy is protected to a great extent against external shocks and cycles of low or high public investment.
• Healthy savings: Compared to low personal saving rates in many developed countries in the west and east (6%-7% in the US, 9%-10% in Germany, 4% historically in UK, 2.5%

in Japan). India’s households have maintained a high saving’s share of their income at 22%.

• Working age majority: With a median age of 28 years, India is a nation of young working-age persons who drive both income and consumption. It will continue to remain young up to 2030 with a median age of 31 years, compared to 40 years in the US and 42 years in China.
• Policy reforms such as increased FDI limits in most sectors, including retail, manufacturing and telecom driving increased participation of foreign investors and easier investment norms for non-resident Indians.
• Active campaigning by the government for investment and trade cooperation, including Make in India and Start-up India to create a supportive environment for manufacturing and entrepreneurship respectively.
• Increased ease of doing business through changed processes such as a uniform Goods and Services Tax across India since mid-2017 and easier norms for opening, obtaining licences and investing in new businesses.
• Large-scale infrastructure development projects such as smart cities, industrial corridors, road, rail and shipping hubs, and power projects.

Main drivers of future consumption

• Income growth: Growth in income will transform India from a bottom-of the-pyramid economy to a truly middle-class led one, with consumer spending growing from $1.5 trillion today to nearly $6 trillion by 2030.
• Steady and dispersed urbanization: While metros and emerging boom towns continue to drive economic growth, rural per capita consumption will grow faster than in urban areas mimicking consumption patterns of urban counterparts.
• Favourable demographics: With a median age of 31 in 2030 (versus 42 in China, 40 in the US), India will remain one of the youngest nations in the world with one of the largest working-age populations. India will add more working-age citizens to the world than any other country.
• Technology and innovation: Internet access will be democratized by 2030 with more than 1 billion Indians – rural and urban, old and young – on the internet, a truly remarkable achievement in terms of inclusion.
• Evolving consumer attitudes: The triad of age, education/occupation and connectedness will result in distinct consumer preferences even as income remains a strong determinant of consumption choices.

Key predictions made by the report:

• Rising income and the expansion of the middle class will reshape future consumption.
• Consumption led growth will diminish the urban-rural divide significantly.
• Liberalization’s children – India’s Millennials and Generation Z will become a major consumption pool and spend more than their predecessors.
• Indian peculiarities will shape future opportunities for indigenous offerings, e-commerce, value-for-money brands and digital entertainment.
• Many consumer archetypes will persist as age, education, occupation and connectedness begin to strongly influence preferences within each income segment.
• Connected India, with more than 1 billion internet users, will have significantly more informed consumers who will demand greater transparency from brands.
• New business models enabled by technology, will monetize and organize latent consumption opportunities.