Consumer spending in India poised for explosive growth: The Boston Consulting Group Study

The Boston Consulting Group (BCG) and The Confederation of Indian Industry (CII) jointly released a study titled The Tiger Roars: An In'Depth Analysis of How a Billion Plus People Consume. "This report examines the shape and size of consumption expenditure in India in detail, and its expected evolution over the next decade. While India's robust consumption growth presents attractive opportunities for companies, its unique diversity and variety makes it challenging to capture these opportunities. Towards that end, this report presents a framework and approach on how to de'average the opportunity to better segment consumers and effectively understand their buying preferences," says Abheek Singhi, Leader of the Consumer & Retail Practices, BCG India and co-author of the report.

Buoyed rising household income, the coming of age of a new generation, and other socioeconomic forces, overall consumer spending in India is likely to expand 3.6 times”from $991 billion in 2010 to $3.6 trillion by 2020. The projected 14 percent growth rate is much faster than the anticipated annual global growth of 5.5 percent”and even faster than the anticipated growth in emerging economies of 9 percent. By 2020, India will constitute 5.8 percent of global consumption”more than double the 2.7 percent it now represents.

Despite the current global economic environment, India continues to march along a robust growth path. With the recent regulatory changes, increasing consumption levels and changing consumer preferences, the FMCG and retail sectors are standing at the point of inflexion," says Amitabh Mall, Partner & Director, BCG India.

India has a billion plus consumers spanning all income segments. The income pyramid is real but does only a partial job of explaining consumer attitude and behaviour. This report provides a definitive view of the income segmentation and more importantly uses other parameters of location, education and occupation to define the seven segments in India.

Professional Affluent (Two percent of households)

Urban Aspirers (Eight percent of households)

Large Town Next Billion (Six percent of households)

Small Town and Rural Next Billion (Twenty Four percent of households)

Food, housing & consumer durables and transport & communication are expected to be the Top 3 categories, accounting for 65 percent of consumption in 2020. The Professional Affluent are expected to dominate consumption in 2020, accounting for 26 percent of total consumption expenditure, up from 16 percent in 2010. By contrast, spending by struggler households will decline from 26 percent in 2010 to 11 percent in 2020.

"The roar of the Tiger is a fitting metaphor for consumer spending in India. Consumer spending in India will continue to roar, but the companies that try to capture it may not be so fortunate. India is a big and growing consumer market, but not an easy one. Understanding the size and shape of the prize and where it is hidden in the challenging fabric of India are the first steps to capturing it," concludes Abheek Singhi.