The big consumption shift

Consumer is king we've heard often enough. But in India, the consumer is the very engine of economic growth. Be it the Asian crisis of 1997 or the global financial crisis of 2008, India has managed to weather most global storms with relative ease because of a large domestic economy. Powering the world's fastest-growing economy is private consumption, which accounts for 60 per cent of India's GDP. In contrast, consumption accounts for 40 per cent of China's economic growth, while 60 per cent is investments. It is the domestic consumer that has come to the rescue of companies and investors in the worst of times. Given that the contribution of investments in India's growth trajectory is erratic, consumption is the only reliable engine of growth. And herein lies both the opportunity and threat for investors as the consumer's preferences and behaviour are fast changing, as are cravings. First, the good news. India is set to become the world's third-largest economy in the next five years from the world's sixth largest at present. Domestic consumption is expected to be a $3 trillion opportunity by 2030, according to the World Economic Forum's insight report on the future of consumption in India (dated January 2019). As urbanisation gains pace, India's households will consume more goods and services. And the opportunity is not limited to any particular economic segment or age group. The opportunity is going to be huge and spread across different income groups. McKinsey believes that India will have 100 cities with a population of

This article was originally published on February 15, 2019.