In brief
With a billion Indians lacking the resources to spend, the market is showing signs of a "premiumisation" trend, where luxury products thrive while the middle class struggles.
With a staggering population of 1.4 billion, India is facing a concerning divide: close to a billion of its citizens have little to no disposable income for non-essential goods, according to a report by Blume Ventures. This narrows the country's consumer base to around 130–140 million people, comparable to Mexico’s population. Notably, the report classifies 300 million as "emerging" consumers, who are now beginning to engage with digital payments but remain cautious with their spending.Instead of expanding, this consumer class is reportedly "deepening," meaning that while the wealthy are becoming richer, the number of wealthy individuals isn’t significantly increasing. The resulting trend of "premiumisation" sees brands focusing on high-end products as luxury homes and expensive tech devices dominate sales, leaving more affordable options behind. Additionally, the report highlights a stark income inequality challenge: the top 10% of earners now possess 57.7% of the national income, while the lower half's share has decreased drastically. In fact, recent hardships, including the end of easy credit post-pandemic and rising debt levels, have intensified this consumption slump. Despite a possible uptick in rural spending due to robust harvests and a $12 billion tax initiative, the long-term outlook for middle-class India is grim, with stagnant wages and diminishing savings making it harder for them to contribute to consumer demand.The impact of automated jobs on middle-class employment, particularly in routine services, raises further alarm regarding economic stability. If consumption continues to fall due to job displacement, it could significantly disrupt India's economy and future growth prospects.
