India on track to become the world's consumption capital, report says

India is poised to become the global consumption capital, surpassing major economies, according to a new report. With private consumption accounting for 56% of the country's GDP, India's spending growth rate is now the fastest in the world.

A report by Angel One and Iconic Asset projects that India's total consumption will double by 2034, driven by rising household formations, workforce expansion, and increasing discretionary spending.

Household growth driving demand

One of the key drivers behind India's consumption surge is the rising number of nuclear families. Household growth is now outpacing population growth, leading to higher per-household spending.

Additionally, India is set to lead global workforce expansion, fueling economic activity and disposable incomes. The report notes that, as more individuals enter formal employment, purchasing power will increase, boosting demand for consumer goods, services, and experiences.

Massive spending potential

India's impressive savings potential is another catalyst for its consumption boom. Between 1997 and 2023, total household savings stood at $12 trillion. By 2047, this figure is expected to jump tenfold to $103 trillion, significantly enhancing consumer spending capacity.

Recent tax cuts announced in the Union Budget are also expected to spur demand. The report estimates that the Rs 1 lakh crore freed up through tax reductions could translate into Rs 3.3 lakh crore in additional spending, adding 1% to India's GDP growth.

Discretionary spending poised for rapid growth

India is expected to follow global consumption trends, where discretionary spending—on items such as electronics, apparel, jewellery, and experiences—grows at a faster rate than spending on essentials.

The report highlights historical parallels, noting that during periods of economic expansion in the US and China, discretionary spending far outpaced basic consumption.

"Consumption spending in the US increased tenfold during a strong rise in per capita income. India could witness similar trends as incomes rise," the report stated.

Despite the rise of modern retail, 92% of India's retail trade still happens through small neighbourhood Kirana stores. The report suggests that this presents a massive opportunity for organized retail chains to expand, gradually capturing a larger share of India's consumption economy.

Gen Z to play a central role

India's young population will be a major force in driving spending over the next decade. The country has more Gen Zers than the entire population of the United States, making them a crucial consumer demographic.

By 2035, the report projects that every second rupee spent in India will come from a Gen Zer, solidifying the country's position as the world's leading consumption hub.