MUMBAI: India is on course to become the third largest consuming economy in the world after witnessing profound societal change over the past decade, but these developments will continue and brands should get prepared, argue two leading consultants.
In an article for Livemint, Abheek Singhi and Namisha Jain – both partners at the Boston Consulting Group – say consumption by Indians has increased more than threefold in the past 10 years and is poised for similar growth in the next decade.
For brands seeking to tap into this opportunity, Singhi and Jain say the affluent middle class will be a key consumer segment with this class of consumer expected to account for about 40% of all Indian consumption by 2025.
But unlike many other countries in Asia where middle class consumption is concentrated in a handful of core cities, they estimate that just 40% of India's population will live in urban areas by 2025.
By then, these city-dwellers should account for more than 60% of total consumption and, of particular note, lower tier cities ranked 50 to 500 in size are expected to account for a large part of this growth.
Other societal developments that Singhi and Jain believe will have a powerful impact on consumer spending are gradual moves towards the nuclear family in India as well as a sharp rise in the number of people who identify as being single.
For example, the number of single women aged over 20 increased by 40% between 2001 and 2011 while the average age for getting married has increased significantly for both sexes over the same period.
"This change has implications not only for household sizes, demographics and the economics of income and expenses, but also for the very definition of family," the authors write.
"Anecdotal evidence and parallels from other countries indicate that these singles, who are at one level more individualistic also think of communities (physical and virtual) and causes (social or political) as proxies for families," they add.
Another important change taking place across India is the growing influence being exercised by women, who have benefitted from dramatic improvements to their educational opportunities as well as improved healthcare.
"Apart from greater literacy levels, this trend will have a much wider impact, ranging from changed workforce demographics to greater economic independence for women and other social changes," Singhi and Jain predict. "This is not going to be a sudden change, but more like a steady, tectonic shift."
Data sourced from Livemint; additional content by Warc staff