A recent report highlights that while India is home to 1.4 billion people, nearly a billion lack the financial capability to spend on discretionary goods and services. The consuming class, which represents the potential market for businesses and start-ups, is estimated to be only around 130-140 million people, comparable to the population size of Mexico.

Key Findings:

• Consuming Class: Approximately 130-140 million people in India form the country's consuming class.

• Emerging Consumers: Another 300 million are categorized as "emerging" or "aspirant" consumers who are cautious spenders just beginning to engage in digital transactions.

• Wealth Inequality: The report emphasizes that India's wealthy population is not expanding in numbers, though existing wealthy individuals are growing richer. This has led to a consumer market that is "deepening" rather than "widening."

Market Trends:

• Premiumisation: There is a significant shift towards premium products catering to the wealthy, with rising sales of ultra-luxury housing and premium smartphones. Affordable homes now make up only 18% of India's market, down from 40% five years ago.

• Experience Economy: High demand for premium experiences, such as concerts by international artists, reflects the focus on high-end consumption.

Economic Disparities:

• Post-Pandemic Recovery: The findings reinforce the view of a K-shaped recovery in India, where the rich have become richer, and the poor have seen a decline in purchasing power.

• Income Inequality: The top 10% of Indians now hold 57.7% of national income, up from 34% in 1990, while the bottom 50% have seen their share drop from 22.2% to 15%.

• Consumption Challenges: Financial savings and indebtedness among the masses have worsened, with a crackdown on unsecured lending affecting the consumption ability of emerging consumers.

Future Outlook:

Short-term boosts in spending are expected from a record harvest and a recent $12 billion tax relief. However, long-term challenges remain, particularly for India's middle class, which faces stagnating wages and reduced savings. The rise of AI and automation is also impacting white-collar jobs, further exacerbating economic disparities.

The government's recent economic survey highlights concerns over labor displacement due to technological advancements, emphasizing the potential macroeconomic implications for India's services-driven economy.