Consumption and the India growth story

Once the Narasimha Rao-led Indian Government initiated sweeping economic reforms in the last decade of the previous century, the Indian economic juggernaut has rolled on.

Published: 01st November 2021 03:32 AM  |   Last Updated: 01st November 2021 10:08 AM   |  A+A-


Representative Image (File | Reuters)

Express News Service

Once the Narasimha Rao-led Indian Government initiated sweeping economic reforms in the last decade of the previous century, the Indian economic juggernaut has rolled on.

With the passage of time, Indians have become far more aspirational in their consumption patterns and now, in addition to the necessities, are also spending on health, education, leisure, and technology and lifestyle products. 

Over the last decade, household consumption in India grew 13% year-on-year to reach `120 trillion in 2019, as per the BCG Report.

With rising affluence, an increasingly upwardly mobile population, and an enabling macro-economic environment, this is likely to grow further in the coming decades.

There are multiple things that can happen in an economy when consumption grows. The demand for more goods and services encourages companies to invest in production and expansion. As companies deploy more capital and expand their businesses, they create jobs. Both employment as well as income levels increase. As a result, people have more money to spend on goods and services and also save and invest. In this way, the cycle of growth continues.

India is the world’s sixth largest economy and is slated to grow at a fast clip in the coming decade with an ambitious target of becoming a $5-trillion economy by 2025. It has now become one of the major growth engines of the world economy. Since the beginning of this century, India’s per capita GDP has grown almost 6.5 times. During this period, the growth in India’s per capita GDP was also one of the fastest among the large emerging markets.

The consumption story in India has multiple drivers. Firstly, there is emerging evidence of a revival in income growth. Rising income and expansion of the middle-income segment is likely to fuel future consumption growth. Secondly, India has a highly diverse population which has multiple requirements and needs. Further, with the rural-urban gap diminishing, consumption could get a further boost. Endorsing this is the fact that urbanisation is increasing at a strong pace and India’s urbanisation rate is expected to improve to 40% by 2030. And finally, technology advancements are connecting people and businesses in multiple ways and enabling better information discovery and seamless transactions.

There is evidence pointing towards steady consumption growth. But, as an investor, how can you benefit from this growth?  For those with the wherewithal, investing in stocks that are likely to benefit from growth in consumption could be an option.  However, this is easier said than done. Choosing the right sectors and stocks within the consumption theme can be very challenging and requires expertise. The optimal alternatives for retail investors especially could be Exchange Traded Funds (ETFs) and Mutual Fund schemes with a consumption theme or adequate exposure thereto.  As I sign off with Festive Season Greetings, permit me to also add a cautionary note - Celebrate responsibly, Stay Safe.

Ashok Kumar
Head of LKW-India. He can be reached at


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