By Ashoke Agarrwal
India is a’rollin!
Indian government projections see Indian GDP hitting $32 trillion by 2047. Goldman Sachs predicts India will be the second-largest economy by 2075. In the long run, we might all be dead, but our great-great-grandchildren will be rich.
The predictions are just that – predictions. There are many socio-political, infrastructural, and geo-political challenges that India will need to meet before it realises its full potential.
At the core of the promise of India is its demographics. Martin Wolf, the chief economics commentator of The Financial Times, London, and an avid India watcher, makes a pithy observation. He believes that the purchasing power of the Indian consumer will be 30% higher than that of consumers in the US by 2050. Goldman Sachs’ and Martin Wolf’s predictions are sourced from an article in HBR titled “Is India The World’s Next Great Econimc Power” by Bhaskar Chakravorti and Gaurav Dalmia.
Look at our demographic trends as posited by the ICE360 surveys by research organisation PRICE (People Research of India’s Consumer Economy). PRICE periodically conducts ICE360 (Household Survey of India’s Consumer Economy). It surveyed in 2014, 2016 and 2021.
The study in 2021 had a sample frame of 200,000 households and a sample size of 40,000. PRICE has published an analysis of the ICE360 surveys in a book titled “The Rise of India’s Middle Class”.
ICE360 classifies Indians into four income classes – the Rich (annual household income of more than Rs 30 lakhs), the Middle Class (annual household income between Rs 5 to Rs 30 lakhs), the Aspirers (annual household income between Rs 1.25 lakhs to Rs 5 lakhs) and the Destitute (annual household income less than Rs. 1.25 lakhs).
According to ICE360, the picture in Financial Year 2015-16 (FY16), with annual household at 2020-21 prices, India had 37 million people in the Rich category, 349 million as Middle Class, 735 million as Aspirers and 209 million as Destitute.
The household income profile of India is set to change dramatically over the next two to three decades.
Table: India’s Income Pyramid at constant 2020-21 prices (Source: ICE360 Survey by PRICE) in millions of individuals (% of total population)
| Income Class |
FY16 |
FY21 |
FY31 |
FY47 |
| Rich |
37 (2.8%) |
56 (4.0%) |
169 (11.0%) |
437 (26.3%) |
| Middle Class |
349 (26.2%) |
432 (30.5%) |
715 (46.7%) |
1015 (61.1%) |
| Aspirers |
735 (55.3%) |
732 (51.7%) |
568 (37.1%) |
184 (11.1%) |
| Destitute |
209 (15.7%) |
196 (13.8%) |
78 (5.1%) |
25 (1.5%) |
| Total |
1330 (100%) |
1416 (100%) |
1530 (100%) |
1661 (100%) |
If you think ‘Rich’ is a misnomer for a household earning Rs 30 lakh or more a year, consider this. ICE360 classifies households earning more than Rs 2 crore yearly as the Super-Rich. The Super-Rich segment, in constant 20-21 prices, were 25,000 households in 1994-95 and rose to 4.5 lakh households in 20-21. Even if we were to take a modest 12% annual increase in the number of Super-Rich households, India would have 15 million households with a Rs 2 crore yearly income at constant 20-21 prices by 2050.
Factor in Purchasing Power Parity (PPP), and we begin to see why Martin Wolf came to his conclusion about India’s purchasing power by 2050.
The latest (2022) World Bank estimate of PPP conversion of the Indian rupee to USD is Rupees 22.91 to 1 USD.
India, by 2050, would have 60 million people (about 15 million households) living in households with incomes comparable in terms of purchasing power to US households with an annual income of USD 900,000 and 380 million people (about 90 million households) with PPP incomes equal to US households with incomes of USD 135,000.
The US Census estimates the number of US households by income households.
Table: US Household Income (US Census Bureau) in million households (% of total number of households)
| Annual Household Income |
In 2001 |
In 2022 |
| All Households |
109.3 (100%) |
131.4 (100%) |
| $75 K to $100K |
14.4 (13.2%0 |
16.4 (12.5%) |
| $100 K to $150 K |
18.0 (16.5%) |
21.5 (16.4%) |
| $150K to $200 K |
8.3 (7.6%) |
12.1 (9.2%) |
| $200 K + |
8.4 (.7.7%) |
15.6 (11.9%) |
The numbers indicate the conservative nature of Martin Wolf’s conjecture of the total purchasing power of India being 30% higher than that of the US by 2050.
While many think that India’s economic rise will be the cause of the rising income of India’s people, the truth is that it is the increasing incomes of the Indian people that will be the driving force behind India’s economic rise. Better aware and educated Indians with rising incomes will propel the socio-political and geo-political structures to turbocharge India’s economic rise, thus setting up a virtuous cycle
When B2C marketers combine the rise of household incomes with the age distribution of India’s population, exciting insights emerge.
Table: Age Distribution in millions (% of the total population) Source: CIA World Book
| Age |
Total |
| 0-14 |
348.8 (26.2) |
| 15-24 |
232.1 (17.5) |
| 25-54 |
555.1 (41.7) |
| 55-64 |
104.8 (7.9) |
| 65+ |
89.1 (6.7) |
| Total |
1329.9 (100) |
The implications of rising incomes for age-income segmentation in the domestic market are seminal in terms of medium and long-term planning. I plan to take that up in a later column.
This column focuses on the potential it opens up for Indian B2C products and services in the global market.
Over the next two decades, India’s broadening income pyramid will provide Indian B2C products and services with economies of scale in the domestic market that they can leverage into shares in the global market. The broadening income pyramid also ensures that this leverage will exist in both the mass and premium ends of the market across both developing and developed countries and markets.
The rich in India (as defined by the ICE360) will grow from 4% of the population today to 11% of the people in 2030 and 26% of the population by 2047. The Middle Class will increase from 30% today to 47% in 2030 and 61% by 2047.
And given India’s demographics, as incomes rise, with time, substantial numbers of second and third-generation affluent and middle-class individuals will drive consumer trends leading and aligning with global trends.
Some multinationals and experts quibble about the definition of middle-class and affluent in India. This is because they look at the Indian market and consumers through the lens of market rates of conversion (Rs.82 to USD as compared to a PPP of Rs 23). On the other hand, multinationals who have succeeded in India plan for pricing based on PPP and reap the benefit of India-sized markets.
For Indian companies to leverage B2C markets for products and services in developed countries, they must reverse the PPP thinking of multinationals from the Western world who have succeeded in India.
Multinationals coming to India compromise product quality and ingredients to fit the PPP paradigm. Indian multinationals must up quality parameters to deliver price-quality expectations in developed markets. In some cases, it might be feasible with Indian production operations. In others, the first step to addressing a developed market could be to set up production and delivery operations there.
Either way, the experience of delivering on the product-quality expectations in developed markets will stand Indian companies as their home market becomes one.
India’s B2C companies will also have an equally lucrative market in developing markets worldwide. In these markets, India must learn from the PPP playbook of B2C foreign multinationals who have succeeded in India. India’s rising profile as an economic powerhouse will aid in the marketing of Indian B2C brands in these countries.
The rise of e-commerce, digital and social media have lowered threshold marketing costs and thus will ease the way for Indian B2C multinationals.
There is a rising trend of Indian B2C companies looking to spread their wings in foreign markets.
For example, Tanishq, Titan’s jewelry brand, plans to expand its foreign presence from seven outlets to 25 by next year, mainly in the GCC.
The key target for most Indian B2C brands with export sales is the Indian diaspora.
The thesis is that with India’s fast-growing middle and affluent class, Indian B2C brands can produce and market world-class products and services in India and leverage their experience and revenues to address the middle class and the wealthy worldwide.
A Tanishq can leverage its design and sourcing expertise catering to a globally-minded consumer in India to compete with established jewelry brands worldwide. Wipro Consumer Products can take its personal care brands global, leveraging the uniquely Indian ingredient stories with quality-price expectations across markets. To do so, it might need to set up production operations in many markets, as many multinationals who have come to India have done.
I recently met an entrepreneur who plans to enter the global market for luxury handbags by first building Rs 40,000 handbags in India. He knows millions of Indian households in the Rs 2 cores plus income bracket who would give an Indian brand a chance against the Coaches and Kate Spades of the world.
The time has come for haute couture brands like Sabyasachi to leverage their massive success in lux ethnic wear into becoming a lux brand on the world stage, competing with the grandees from Milan and Paris.
The scope for building India-origin global B2C brands is broad – from fashion to food, from financial services to travel, and from auto to Artificial Intelligence. The challenges to be met are huge, but so is the opportunity that beckons.