Mumbai: The Indian consumption market will grow two-and-a-half times by 2025, to Rs110 tn from Rs43 tn in FY 2010, according to a Kotak Institutional Equities report.
More Indians will have a pocketful of money and a long shopping list, spending disproportionately on leisure, hotels, housing, household goods, healthcare and more, but less on bare necessities and staples, as a proportion of consumption.
The study classifies households into: Real-rich, Upper class, Prospering, Evolving, Emerging and Surviving.
Prosperity changes spend trends according to the report. With increased prosperity, societies spend less on staples and increase discretionary spends as a percentage of their expenditure. By 2025E the Indian consumption market will be two-and-a-half times bigger than it is today.
The top three classes will account for about half the consumption, from less than a third currently and the Surviving class will emerge from a base of deprivation. Over our forecast period, we model consumption at 59-62% of GDP and assume long-term real growth of 7% on a population increase of 1% a year.
The urban market will account for more than 55% of the consumption market by FY2025E from less than half today and urban households will account for about 40% of the total number of households, up from 30% currently.
The push towards urbanization will not come from an overspill into metros, but development of tier-II and tier-III cities. The emergence of growth hubs can offer stability to the growth story, the report says.
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