Despite economic uncertainty, India’s private consumption surged past $2.1 trillion in 2024, nearly doubling over the past decade. This rapid growth positions India to become the world’s third-largest consumer market by 2026, behind only the U.S. and China.
Several factors are driving this expansion. E-commerce and digital payments have made transactions seamless, while rising incomes, urbanization, and shifting consumer preferences continue to fuel demand. Over the last decade, more Indians have moved towards premium brands, experience-driven retail, and personalized products, boosting overall consumption.
Key Consumer Market Trends
India’s retail and financial sectors are undergoing significant transformation. The organized retail market is growing at a 10% compound annual growth rate (CAGR) and is projected to reach $230 billion by 2030. Meanwhile, credit card adoption is set to triple, increasing from 102 million in 2024 to 296 million by 2030. Additionally, the number of Indians earning over $10,000 annually is expected to grow from 60 million to 165 million by 2030, further strengthening purchasing power.
Stock Market & Economic Growth: A Mixed Picture
India’s consumer-driven economy suggests strong long-term growth potential, but the stock market remains sluggish due to short-term uncertainties.
The country’s GDP grew 6.2% in Q3 (Oct-Dec), slightly below expectations but still stronger than the previous quarter. A revival in rural demand helped stabilize the economy, with agriculture growing 4.6% year-over-year (YoY). Additionally, infrastructure spending and construction activity remained steady, providing economic stability.
However, overall economic growth is slowing. On a yearly basis, GDP growth has declined from 8.6% YoY last year, raising concerns about long-term sustainability.
The Reality of India’s Consumer Market: Who’s Really Spending?
While India is often seen as a vast consumer powerhouse, a recent Blume Ventures report reveals a stark wealth divide. Nearly 90% of Indians—about 1 billion people—lack the disposable income to spend on non-essential goods and services. This means that only 130-140 million Indians, roughly the size of Mexico’s population, drive discretionary spending.
Beyond this small elite, an additional 300 million Indians are classified as “emerging consumers.” While they are beginning to spend more—thanks to digital payments and access to affordable credit—they remain cautious and price-sensitive. Their spending primarily fuels industries like OTT platforms, gaming, digital education, and fintech, where small, recurring payments lower the financial barrier to entry.
The Rise of Premiumisation: How India’s Wealthiest Drive Consumption
Rather than broad-based consumption growth, India’s economy is becoming more concentrated among the wealthy, leading businesses to focus on high-end products and luxury services.
Luxury housing sales have soared, while budget housing’s share has dropped from 40% to just 18% in the last five years. Similarly, high-end smartphones are thriving, while demand for budget models stagnates. Branded and premium products dominate the market, reflecting a shift toward “premiumisation.”
This trend is also evident in the experience economy, where expensive concert tickets for international artists like Coldplay and Ed Sheeran sell out rapidly, highlighting the spending power of India’s top consumers. According to Blume Ventures, companies catering to this wealthy niche are thriving, while those focused on the mass market struggle to maintain growth.
The K-Shaped Recovery: Widening Wealth Inequality
India’s post-pandemic economic recovery has been K-shaped, meaning that while the wealthy continue to grow richer, the lower and middle classes face increasing financial strain.
The top 10% of Indians now control 57.7% of national income, a sharp increase from 34% in 1990. Meanwhile, the bottom 50% of the population has seen its income share shrink from 22.2% to just 15%. This growing divide is not just about income—it reflects deeper structural issues, including stagnating wages, rising debt, and declining savings.
The Middle-Class Squeeze: Shrinking Financial Security
The Indian middle class—historically a key driver of economic growth—is now under significant financial pressure. A Marcellus Investment Managers report found that the middle 50% of taxpayers have seen little to no real income growth over the past decade. After adjusting for inflation, their purchasing power has effectively halved.
At the same time, household savings have dropped to a 50-year low, according to the Reserve Bank of India (RBI). Rising indebtedness is forcing middle-class families to cut back on discretionary spending, further weakening overall consumption.
Another challenge is the decline in white-collar job opportunities. With automation and AI replacing clerical and routine administrative roles, fewer stable jobs are available for India’s middle-income earners, further impacting their financial well-being.
Government Policy & Economic Uncertainty
The Indian government has acknowledged these economic challenges, particularly the risks posed by automation-driven job losses in the IT and service sectors. Given that consumer spending drives India’s economic growth, a prolonged squeeze on the middle class could slow long-term expansion.
In the short term, some factors may boost consumption. A strong rural harvest could drive higher demand in rural areas, while a $12 billion tax relief package announced in the Union Budget might offer temporary financial relief. However, experts warn that these measures will not fundamentally change India’s economic landscape unless deeper structural issues—such as income inequality, weak wage growth, and rising debt burdens—are addressed.
The Big Question: Who Benefits from India’s Growth?
India’s consumer economy is expanding, but for whom? While a small, affluent elite enjoys rising wealth and luxury consumption, the vast majority of Indians struggle to afford even basic discretionary purchases.
The future of India’s economy depends on whether policies and business strategies can bridge this widening gap—or whether companies will continue to cater primarily to the wealthy few. For now, one thing is clear: India is booming, but not for everyone.
Also read: Indias-economic-slowdown-temporary-setback-or-serious-issue
