India is expected to emerge as the third largest consumer market, just behind the US and China, WEF said in a report titled 'Future of Consumption in Fast-Growth Consumer Market – India'.
Rising income will transform India to a middle class-led one from a “bottom of the pyramid economy”, with consumer spending in the country to grow from the current $1.5 trillion to $6 trillion by 2030, a World Economic Forum report said Wednesday. At present, India is the sixth largest economy in the world with an annual GDP growth rate of 7.5% and domestic private consumption accounts for about 60% of the GDP. Bottom of the pyramid- also called the base of the pyramid – is a phrase in economics that refers to the poorest two-thirds of the economic human pyramid.
With this, the country is expected to emerge as the third-largest consumer market, just behind the US and China, WEF said in a report titled ‘Future of Consumption in Fast-Growth Consumer Market – India’. Rising incomes and the expansion of the middle class and high-income segment will reshape future consumption, the report said, adding that the growth in the middle class will lift approximately 25 million households out of poverty.
“Upper-middle-income households will drive 47% ($2.8 trillion) of total consumption, and high-income households will drive another 14% ($0.8 trillion), compared to 30% and 7% respectively today,” the report said. The future consumption growth is expected to come mainly from rich and densely populated cities and the thousands of developed rural towns across the country. Of the total, about $1.5 trillion will come from top 40 cities, and many thousands of small urban towns will also drive an equally large spend in aggregate, it added.
The critical challenges on this path that need to be addressed include socio-economic inclusion of rural India, skills development and employment of the future workforce, and creating a healthy and sustainable future for its citizens.
“India is at a tipping point, both in terms of economic growth and in the human development of its billion-plus citizens. As the country enters a new era of envisioned growth, collaborative efforts, especially public-private collaborations to address key challenges can unlock the full potential of a young, progressive and dynamic nation to establish India as a model for the world’s fast-growing consumer markets” said Mayuri Ghosh, Project Lead, Future of Consumption System Initiative, World Economic Forum.
WEF produced the report in partnership with Bain & Co. The in-depth survey was conducted across 5,100 households in 30 cities and towns in the country, drawing from over 40 interviews with public and private sector leaders.