Exploring a new specie- The Indian Middle class

India’s rapid economic growth has stimulated the genesis of a completely new specie called the Indian middle class. Times have changed from the at best “modest” eighties when around 93% of the Indians persisted below $1 day to 2005 when only 54% of the population lives below $1 a day. Mckinsey Global institute in its research report on India christened as “The golden Bird” has predicted that 465 million people would further be saved from deprivation if India continues to grow at the rate of 7.3% per annum for the next two decades.

The rapid economic growth has had a tremendous impact on the buying potential across Indian demographics. Inequalities of income distribution have indeed had their impact on the sustainable development of the country so far but the impact of broad based growth have trickled down to the different income segments in some respect or the other. Pockets of the Indian consumer have certainly been deepened by the surge of the Indian economy and the same has positioned India as the most dynamic market of the world after China.

Growth has not only given the buying potential to the Indian consumer but it has also changed the consumer psyche in most respects as well. The price elasticity of demand in India is may be at its lowest ever which is attributable to the significant change in the outlook of the consumer towards consumption, which is far more aggressive from the past. Mckinsey global institute predicts that the total consumer spending would quadruple in coming years, reaching INR 70 trillion in 2025. Higher private incomes and the population growth will stimulate the rise in consumption. The institute has categorically downplayed the role of inherent saving behavior of the Indian consumer as an impediment to increased spending in spite of sustained income growth.

Alongside burgeoning spending potential the components of the Indian consumption basket have also changed significantly. Although food and transport still occupy the two top slots in the consumption patterns for Indians but there is an inherent shift towards personal care, high tech products such as mobiles, Mp3 players etc. The significant shift stands testament to the maturity of the Indian consumer markets which are surely going to be the most attractive destination for global products very soon that is if it has not achieved that distinction already.