Also, the biggest desires of aspirer households used to be to own a house and a car. Similarly, affluent households are becoming comfort seekers, and they are willing to pay for it. Traditionally, for many consumer categories, increasing market penetration has been the biggest driver of sales growth. But this is set to change as frequency of purchase and spending per purchase occasion rise in importance. There is a shift toward higher-quality, higher-price subsegments within categories, as Indian consumers trade up with greater frequency and enthusiasm.
While luxury-goods makers may be able to sell to India’s global consumers with little modification to their products, those selling to India’s new middle class will need to be innovative to square the difference between the rising aspirations of consumers and their still-modest pocketbooks. The extent of the internet’s influence on consumer decision making and behaviors will be constrained only by the rate of increase in internet penetration. Already, a rising number of consumers income pyramid india in all segments are using the internet as their first port of call in framing and driving their purchase decisions. Our research has found that about 70% of those who have access to the internet go online to make informed purchase decisions. This number varies among categories of products and services, but it is on the rise everywhere. As they get more comfortable with digital capabilities, their usage patterns exhibit growth that belies age and other demographic variables.
Further work using the RGBM model on alternate measures of income inequality such as the Gini coefficient time-series for India could help further validate our results. The reallocation parameter in this model is a measure of overall reallocation occurring in the income distribution. As India seeks to reap its demographic dividend and pursue higher quality growth, it is obvious that it needs to include its women.
- In designing responses to address this situation, it is important to remember that India still remains a low-income country and that there is a need for both continued economic growth as well as inequality reduction.
- Right on top are the households of dollar billionaires, of which we now have some 200, by Hurun’s count.
- Also, the absolute growth in income of the top one percent of the population since the 1980s has been more than that of the bottom 50% people taken together, according to the report.
- Within this segment, the urban elite and affluent are fueling most of the growth.
- The Ministry of Statistics and Programme Implementation reported that the all-India inflation rates based on both CPI (Consumer Price Index) (General) and CFPI (Consumer Food Price Index) were consistently higher in rural India (7.56 per cent than urban India (7.27 per cent) in September 2022.
WID.world uses 2011 Purchasing Power Parity round for international comparisons. It should also be noted that default monetary values for Eurozone countries are displayed in PPP Euros and are thus different from Market exchange rate Euros. A Eurozone country with high relative prices will have a lower PPP Euro average income values. First, we release detailed series for national wealth accounts, which usually cannot be found on other portals. Next, we include corrections for offshore wealth and offshore capital income, so that our series on foreign capital income inflows and outflows are consistent at the global level (e.g. they sum to zero), which is typically not the case in existing databases. In contrast, WID.world combines national accounts and survey data with fiscal data sources.
For Limited Partners (LPs), this offers an opportunity to enter new venture capital markets. Although several social venture funds are already active, true Venture Capital (VC) funds are now emerging. One of many examples of products that are designed with needs of the very poor in mind is that of a shampoo that works best with cold water and is sold in small packets to reduce barriers of upfront costs for the poor. These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power . That build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.
Beauty and the Bias: India Inc needs more sensitivity
It is well known that inequality has been rising in India in the recent past, but the assumption has been that while the rich benefit more than proportionally from economic growth, the poor are also better off than before. Our modelled outcomes (using the RGBM framework) cast doubt on this proposition. We find that the income share dynamics are consistent with a negative reallocation since the early 2000s, i.e., the Indian income distribution possibly entered a regime of perverse redistribution of resources from https://1investing.in/ the poor to the rich. Our model suggests that the historically low-income shares of the bottom decile (~ 1%) and bottom percentile (~ 0.03%) are possibly due to a decline in real incomes in the 2000s. We find qualified support for these theoretical predictions using income distribution data. We characterize these findings in the context of increasing informalization of the workforce in the formal manufacturing and service sectors as well as the growing economic insecurity of the agricultural workforce in India.
Sustainable development of the country necessitates higher standards of human development across all segments of society. India is experiencing many societal changes, including the expanding role of women, increased individualism, shifting roles within families, and rising national pride. These shifts have the potential to fundamentally alter how Indian consumers spend. Companies operating under old notions should keep their eyes and ears focused on the changing reality. Dealing with the changes may require companies to fundamentally rethink their business models, including product offerings, consumer engagement, and marketing. (See Exhibit 1.) Of India’s five household income categories (elite, affluent, aspirers, next billion, and strugglers), the top two income classes are the fastest growing.
From 1980 to 2014, the bottom 50% and middle 40% grew at 89% and 93% respectively. While the average income growth was substantially higher after 1980, there is very little difference in growth rates for the bottom 50% and middle 40%. These evolutions are consistent with the dynamics of Indian wealth inequality, which exhibits a strong increase in the top ten percent wealth share in the recent period, in particular after 2002. Highly unequal income growth at the top mechanically drives wealth inequality across the population, which in returns fuels income concentration, the report says. We also do not model the dynamics of generating the upper tail of incomes, which follows a power law, because of our focus on the lognormal portion of the distribution. However, incorporating this would provide a more complete model for the entire income distribution.
Before we delve deeper into the dynamics of inequality in India, it is useful to contextualize the Indian experience within the broader global experience of inequality. Prior to the Industrial Revolution, mean incomes in most countries were stagnant for many centuries (Alvarez-Nogal & Prados de la Escosura, 2013), but inequality waxed and waned over time as a consequence of idiosyncratic forces such as wars, discovery of new lands, and epidemics (Milanovic, 2016). The rise and fall of inequality around an essentially fixed mean income illustrates the fact that there was no systematic relationship between inequality and income.
New Imperatives for Companies
A little less than two-third of the total GST is coming from the bottom 50 per cent, as per estimates, one-third from middle 40 per cent and only three to four per cent from the top 10 per cent. The wealth of the top 10 richest in India stands at Rs 27.52 lakh crore ($335.7 billion, an increase of around $110 billion which is an 32.8 per cent rise from 2021). There are two parts to executing the RGBM procedure—first, we estimate drift \((\mu )\) and volatility \((\sigma )\) of income; and second, we propagate the income dynamics in Eq. The rich, currently, benefited from reduced corporate taxes, tax exemptions and other incentives, the report added.
Almost 60% of online shoppers rate convenience as a key reason to shop online, and the value of convenience keeps rising as consumers increase their online shopping. Discounts are another popular feature for more than half of online shoppers (especially lighter online shoppers), and availability and assortment of merchandise are important to more than one-third. Trust in showrooms remains the biggest barrier (after basic access) to shopping online, followed by difficulty in website navigation and fear of fake products. Even assuming conservative GDP increases of 6% to 7% a year, we expect consumption expenditures to rise by a factor of three to reach $4 trillion by 2025. India’s nominal year-over-year expenditure growth of 12% is more than double the anticipated global rate of 5% and will make India the third-largest consumer market by 2025.
Market-specific products
Right on top are the households of dollar billionaires, of which we now have some 200, by Hurun’s count. The next bracket, of those with wealth placed at ₹1,000 crore or more, has about 3,000 households. Then we have the report’s ‘international’ ultra high net worth individuals (UHNIs) with household wealth of at least ₹200 crore, about 13,000 of them, followed by 23,000 UHNIs with wealth of ₹100 crore-plus. Regular HNIs, or those with ₹10 crore and above, add up to 294,000 households, while the tally of the ‘affluent’, or dollar-millionaire households with at least ₹7 crore, stands at 412,000.
The Factors Shaping a Growing Market
In this region, we are confronted with greater uncertainty, because even an IHDS scenario (A1B1) suggests the possibility of negative growth in the bottom-most percentiles (Fig. 8e). Essentially, in all of the scenarios where NSSO data were used to estimate the income distribution (B2), lower incomes are found to have negative growth post 2000 (Fig. 8a–c). To explore the difference in income dynamics due to NSSO and IHDS data used by Chancel and Piketty (2019), we construct the GICs for each decade from 1951 to 2010 under both cases (Figs. 8d,e).
Temporal evolution of reallocation
Forest Essentials, advertising itself as “the quintessential Indian Beauty Brand,” has grown into an international premium personal-care company, with Estée Lauder taking a stake. As a result, mobile commerce is becoming the dominant force behind e-commerce growth. Eight of ten urban e-commerce transactions take place by phone—across categories, income segments, and regions. The lack of alternative devices, the ability to make transactions on the go, and additional discounts offered on transactions made through apps all contribute to this growth.
In terms of consumption expenditures, emerging cities (those with populations of less than 1 million) will be the fastest growing. Fueled by rising affluence, expenditures in these cities are rising by nearly 14% a year, while consumer spending in India’s biggest cities is increasing at about 12% a year. We expect emerging cities to see the highest growth in the number of elite and affluent households through 2025. By then, the number of such households will have increased by a factor of more than 2.5 in emerging cities, while it will have almost doubled in major metropolitan areas.
That’s because wealth distribution across India’s 1.4 billion population remains highly skewed. Per capita income is commonly understood as the average income of a person in a specific area, a number that is reached by dividing total area income by its total population. So when the average income of some population segments increase, it inflates the per capita income.