According to a report by BMI, a company that is part of New York and London-headquartered Fitch Solutions, India’s consumer market is set to become the world’s third largest by 2027.
Currently, India ranks fifth, but as the number of middle to high-income households rise, BMI predicts that a 29% increase in real household spending will push India up two places.
The report forecast that the growth in India’s household spending per capita will outpace that of other developing Asian economies such as Indonesia, the Philippines and Thailand at 7.8% year-on-year.
BMI estimates India’s household spending will exceed $3 trillion as disposable income rises by a compounded 14.6% annually until 2027. By then, a projected 25.8% of Indian households will reach $10,000 in annual disposable income.
“The majority of these households will be located in the economic centers such as New Delhi, Mumbai and Bangalore,” says the report. The wealthier households are mainly located in urban areas, making it easy for retailers to reach their key target markets, BMI noted.
India’s youth population is also a driving force for increased consumer spending. Approximately 33% of the country’s population is estimated to be between 20 and 33 years old. Spending on communications will grow by an average of 11.1% annually to $76.2 billion by 2027 due to a “technology-literate, urban middle class with increasing amounts of disposable income that would encourage expenditure on aspirational products such as consumer electronics.”
Additionally, the report noted that global investors such as Blackstone Group and APG Asset Management have invested more funds in the country’s shopping mall business to capitalize on consumer spending growth.