Growing middle-class consumers set to transform India’s economy



Indian consumers are buying like never before. With the specter of the covid-19 pandemic all but gone, the country’s middle-class consumers seem to have approached the
festival season underway with a vengeance. They spare virtually nothing – from alcohol to fashion clothes, consumer durables, smart phones, automobiles, residences
apartments and even holidays abroad. The business is booming. During this September-October festival season, almost all sectors showed record activity.
Consumers want more. The pace is expected to continue throughout the year and beyond. Consumer product manufacturers are stepping up production. Imports
are also increasing despite the fall in the exchange value of the rupee. This trend is bound to have a significant impact on the country’s current and future economic growth, provided producers
and vendors are taking a long-term view of India’s growing market.
Significantly, India’s residential unit sales in the first half of calendar year 2022 hit a nine-year high of 158,705 units across the top eight cities – Mumbai, Delhi
National Capital Region, Kolkata, Chennai, Bangalore, Pune, Hyderabad and Ahmedabad – reports a survey by Knight Frank India. Along with record sales of
residential units came off passenger cars. The latter set a new monthly sales benchmark at 3,55,946 units in September, registering a growth of 26% compared to
the preceding month. Maruti Suzuki saw 131% growth in dealer shipments to 148,380. Hyundai, Tata Motors, Mahindra & Mahindra, Kia
Motors and Toyota, among others, witnessed a surge in demand.
The sale of air conditioners in the first half of this year at about six million units almost equaled the total number of sales last year. “Air conditioner sales this year have been better
than in the past two years, especially in the first half. We’ve never had numbers this high in the past,” says Eric Braganza, President, Consumer Electronics and Appliances
Association of Manufacturers (CEAMA). On the other hand, demand for durable consumer goods is expected to grow from around US$21.5 billion in 2021-22 to over
$25 billion this fiscal year.
The country is expecting record smartphone sales this festive season, worth around $7.7 billion. One in three smartphones sold during the holiday season
be 5G-capable. A report by Counterpoint Research indicates that e-commerce channels are expected to capture 61% of overall sales. The smartphone retail average
Selling price during the holiday season would rise 12 percent to its all-time high at $242. Analysts say normally the holiday season has been the peak of
The Indian smartphone market where almost 20% of annual sales take place over four to five weeks, which makes this period very important for all players in the value chain.
Samsung dominated smartphone sales from September 23-30 this year, grabbing a 26% market share, according to a report by Strategy Analytics. Samsung is followed by
Xiaomi and Realme, with 20% and 17% market share respectively.
At Rs.2,165 crore, alcohol sales in West Bengal were the highest on record in September. October sales are expected to increase further. The state has implemented a sale of alcohol
target of over Rs.20,000 crore this year. Almost every major state in the country has seen record alcohol sales since the start of the current festival season. Upper
Disposable income and changing lifestyles are mainly responsible for the growth in consumption of alcoholic beverages in India. The industry estimates that the consumption of
alcoholic beverages in the country will increase to 16.8 billion liters by the end of this year, up from just 5.94 billion liters in 2018. State governments are generally very pleased.
Higher sales of alcoholic beverages mean higher excise revenue for Indian states. State budget estimates put excise duty collection from industry at Rs.1.4
lakh crore in 2019-20. This could increase significantly this year.
In fact, this year’s holiday season literally started with a bang. The advertising and marketing war has boosted sales volumes as consumers are ready to buy and businesses
are ready to sell. The industry’s advertising expenditure for the festive season increased by 8-10% to about Rs 25,000-30,000 crore. TV should be about 41-
43% of ad spend, closely followed by digital at 33-36%, print at 15-17% and display at around 3.5%. As usual, Amazon India and Flipkart,
the two major e-commerce giants, have fought neck and neck for supremacy. This is the best opportunity to show their strength and enjoy people’s shopping mood.
On September 23, the two e-commerce giants launched their highly anticipated week-long sales – Flipkart’s “The Big Billion Days” sale and “Great Indian Festival”.
sale by Amazon India. Sales were estimated at $5.9 billion during the week, a 28% increase from $4.8 billion last year. Incidentally, the
The country’s e-commerce market is growing rapidly based on the changing tastes and demands of the new generation consumers. The market is expected to reach $120 billion by
India’s more than 200 million middle- and upper-class households, which are growing at the rate of 10-15% a year, seem determined to drive the country’s growth.
economic growth and progress in the years to come. However, this would require government support in terms of indirect tax rates such as GST, State and
central excise duties, stamp duties and property taxes, etc., and the ease of doing business in the country. India’s post-pandemic demand boost propelled its economy to
become the fifth largest in the world, overtaking the United Kingdom. Despite falling stock market and weaker rupee, combined wealth of India’s richest 100 rose by $25 billion
reach 800 billion dollars, reports a study by Forbes.
A report by Oxfam International, which has criticized the growing divide between rich and poor in India, notes that the country has 119 billionaires. Their number has grown from just
nine in 2000 to 101 in 2017. The fortunes of Indian billionaires have increased nearly 10 times in a decade and their total wealth is greater than that of the entire national government
budget for the financial year 2018-19, which was Rs 24.422 billion, according to the Oxfam report. Between 2018 and 2022, India is estimated to have produced 70 new millionaires
every day. The World Economic Forum, however, takes a more positive look at India’s growth story led by its growing segment of the middle class, which it says is really going
take on its full meaning. By 2030, India is expected to transition from a bottom-of-the-pyramid-led economy to a middle-class-led economy. Almost 80 percent of
households will belong to the middle income group, compared to 50% today. The middle class will account for 75% of consumer spending in 2030. (IPA)


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