Mckinsey - The India consumer story

McKinsey Global Institute

Tapping Into the Indian Consumer Market

28 June 2007

The India-Europe Investment Forum

1

HOW WILL INDIA’S CONSUMER MARKET EVOLVE IN THE FUTURE?

India’s economy has been growing rapidly …

• What impact has growth had on Indian incomes and how quickly will they grow in the future?

• How is the distribution of income changing? When will its middle class take off?

• How is income growth effecting urban versus rural areas?

• How much of rising Indian incomes will be spent versus saved?

• What will Indian consumers spend their newfound wealth on?

What does this mean for business and investment opportunities?

How should companies compete for the “new Indian consumer”?

2

OUR PANEL

• Prashant Desai – Group Head, Investor Relations and New Ventures (PE), Pantaloon Retail (India) Limited

• Richard Fairgrieve – Director of Global Emerging Markets, WestLB Mellon Asset Management

• Dippankar S. Haldar – Chief Executive Officer, WadhawanFood Retail (P) Limited

• A.P. Parigi – Managing Director and Chief Executive Officer, Entertainment Network (I) Limited

• R. Subramanian – Managing Director, Subhiksha Trading Services

3

KEY FINDINGS FROM McKINSEY GLOBAL INSTITUTE RESEARCH

• Indian incomes will triple over the next two decades, significantly reducing poverty

• India will emerge as the world’s fifth largest consumer economy

• A large urban middle class will develop, but rural areas will benefit too

• Patterns of consumption will shift rapidly towards discretionary spending

• Income and consumption growth will create opportunities and challenges for business and government

4Source: McKinsey Global Institute

HOUSEHOLD INCOME GROWTH WILL ACCELERATE ACROSS INDIA

Average household disposable income thousand, Indian rupees, 2000

1985–2005

2005–2025

0

100

200

300

400

500

1985 1990 1995 2000 2005 2010 2015 2020 2025

Rural

Urban

5.8%

3.6%

All India

5.3%

4.6%

2.8%

3.6%

Actual Forecast

Compound annual growth rates

5Note: Figures are rounded to the nearest integer and may not add up to 100%.

Source: McKinsey Global Institute

9380

54

3522

18

41

43

36

6 0 000755

1985

02928

1995

4 1

2015F

29

32

2025F

100%1,107

2005E

11 1

19

1,278 1,429Globals (>1,000)Strivers (500–1,000)

Seekers (200–500)

Aspirers (90–200)

Deprived (<90)

Middle class

INDIA WILL SEE CONTINUED REDUCTION IN POVERTY AND GROWTH OF ITS MIDDLE CLASS

Share of population in each income bracket%, millions of people

Household income bracketsthousand, Indian rupees, 2000

6

5 4 3

9 12 12

53 0

0

10

0

17

2005E

43

12

34

2015F

14

16

25

2

70

2025F

0 17

1985

110

1995

12

Globals (>1,000)

Strivers (500–1,000)

Seekers (200–500)

Aspirers (90–200)

Deprived (<90)

INDIA'S AGGREGATE CONSUMPTION WILL QUADRUPLE OVER THE NEXT 20 YEARS

4.1x

Note: Figures are rounded to the nearest integer and may not add up exactly to column totals.Source: McKinsey Global Institute

Aggregate consumption across income bracketstrillion, Indian rupees, 2000

Middle class


7

INDIA WILL BECOME THE FIFTH LARGEST CONSUMER MARKET IN THE WORLD BY 2025

Aggregate private consumption, 2005–2025billion, $, 2000

India Brazil India Italy India Germany

334 18,4292,082 584 13,540 1,064Per capita$, 2000

Source: Global Insight; UN Population Division; McKinsey Global Institute

370 388

746 783

1,5111,521

12 611 8 7 5Rank

2005 2015 2025

8

Food, beverages, and tobacco

ApparelHousing and utilitiesHousehold productsPersonal products and services

Transportation

Communication

Health care

Education and recreation

14

12

12

10

8

9

11

11

1719

20

6

69

7 9 13

4

1 5

2

34100%

2025F

248

5

3

2015F

140

34

5

3

56

60

1995

2

3

25

42

82

2005E

3

5

6

Share of average household consumption%, thousand, Indian rupees, 2000

Note: Figures are rounded to the nearest integer and may not add up to 100%.Source: McKinsey Global Institute

INDIA'S SHARE-OF-WALLET IS SHIFTING AS INCOMES RISE

Discretionary spendingNecessities

McKinsey Global Institute

Tapping Into the Indian Consumer Market

28 June 2007

The India-Europe Investment Forum

10

Back-up

11

0

100

200

300

400

1985 90 95 2000 05

Proprietary database 1985–2005

Econometric forecasting model

2006–2025

On-the-ground insights from McKinsey experience

0%

10%

20%

30%

40%

50%

60%

2006 2009 2012 2015 2018 2021 2024

What makes our work unique?• Focuses on future

consumption

• Covers 100% of demand

• Includes detailed income distributions

• Integrates macroeconomic scenarios

THE MCKINSEY GLOBAL INSTITUTE (MGI) HAS SPENT THE PAST YEAR EXAMINING THE FUTURE OF THE INDIAN CONSUMER MARKET

• Exclusive access to NCAER 300,000 household MISH survey

• Government NAS, NSS, and RBI data• Other sources, e.g., UN, World Bank,

Oxford Economics

12

MGI’s FORECAST ASSUMES 7.3 PERCENT COMPOUND ANNUAL GDP GROWTH

0

20.000

40.000

60.000

80.000

100.000

120.000

1985 1990 1995 2000 2005 2010 2015 2020 2025

History Forecast

Real GDPbillion, Indian rupees, 2000


Overall compound annual growth

Per capita compound annual growth

6.0%

4.0%

7.3%

5.9%

13

KEY FINDINGS






14

GROWTH HAS LIFTED 431 MILLION FROM POVERTY AND COULD LIFT 465 MILLION MOREPopulation in households with annual disposable income less than 90,000 Indian rupees, 2000millions of people

* Number added to deprived if poverty remained at 1985 and 2005 rates respectivelySource: McKinsey Global Institute

327431

180

465

313

598

702

Deprived in 2025

Net reduction in poverty

Increase in poverty due to population growth*

Net reduction in poverty

Deprived in 2005

Increase in poverty due to population growth*

Deprived in 1985

15

THE SHAPE OF INDIA'S INCOME PYRAMID WILL CHANGE DRAMATICALLY AS INCOMES GROW

Strivers (500–1,000)Seekers (200–500)

Aspirers (90–200)

Deprived (<90)

Globals (>1,000) 1.2

10.9

91.3

101.1

2.4

Number of householdsmillion


Aggregate disposable incometrillion, Indian rupees, 2000


Aggregate consumptiontrillion, Indian rupees, 2000

2.0

3.1

11.4

5.4

1.6 1.2

2.1

8.5

4.1

1.0


Aspirers (90–200)

Deprived (<90)

Globals (>1,000) 3.3

55.1

106.0

74.1

5.5 6.3

15.2

14.6

3.8

3.8 4.1

11.8

12.2

3.3

2.7


Aspirers (90–200)

Deprived (<90)

Globals (>1,000) 9.5

94.9

93.1

49.9

33.1 21.7

30.6

13.7

2.6

20.914.1

24.6

11.9

2.4

16.5

2005

E20

15F

2025

F

16

THE INCOME DISTRIBUTION IN THE COUNTRY WILL WIDEN AS POVERTY FALLS AND THE MIDDLE CLASS GROWS

-5

0

5

10

15

20

25

30

35

0 100 200 300 400 500 600 700 800 900 1000


Annual household disposable incomethousand, Indian rupees, 2000

Distribution of household income% of households

19851995200520152025

17

0

20

40

60

80

100

120

140

1985 1990 1995 2000 2005 2010 2015 2020 2025

FIRST ASPIRERS AND THEN SEEKERS WILL BECOME THE LARGEST INCOME BRACKETS


ForecastActual

Deprived (<90)

Aspirers (90–200)


Globals (>1,000)

Seekers (200–500)

Number of households in each income bracketmillions of people


18

KEY FINDINGS






19

RISING HOUSEHOLD INCOMES WILL BE THE KEY DRIVER OF CONSUMPTION GROWTH NOT CHANGES IN SAVINGS

Sources of growth in private consumption 2005–2025billion, Indian rupees, 2000

16,896

69,503

8,360

Privateconsumption 2005

42,326

Disposableincomegrowth

Growth innumber of households

1,922

Changes in savings

Privateconsumption 2025

80%Contribution to overall consumption growth

16% 4%

Note: Figures are rounded to the nearest integer and may not add up to 100%.Source: Oxford Economics; UN; McKinsey Global Institute

20

KEY FINDINGS






21

URBAN INDIA WILL ACCOUNT FOR MORE THAN TWO-THIRDS OF CONSUMPTION GROWTH OVER THE NEXT 20 YEARS

Aggregate annual consumptionbillion, Indian rupees, 2000

16,695

Rural

Urban

69,502

62%

57%

43%16,896

All India consumption, 2005

Rural consumption growth

35,913

Urban consumption growth

38%

All India consumption, 2025

Contribution to consumption growth


32% 68%

22

MIDDLE CLASS HOUSEHOLDS WILL DOMINATE URBAN INDIA

Share of urban households by income class%, millions of households

81

46

219 5

18

50

66

32

12

00100% =

34

53

8333

1985

14

46

1995

1210

2015F2005E

6

26

51

114

2025F

1 Global (>1,000)

Strivers (500–1000)

Seekers (200–500)

Aspirers (90–200)

0

Deprived (<90)

62


Middle class


23

LARGE CITIES TEND TO HAVE HIGHEST INCOMES, BUT SMALL ‘NICHE’ CITIES PROSPERING TOO

0

50

100

150

200

250

300

350

400

0 2 4 6 8 10 12 14 16 18 20

Delhi

Kolkata

HyderabadChennaiPune

BangaloreAhmedabad

Estimated population, 2001million

Average annual household disposable income, 2001thousand, Indian rupees, 2000

Total disposable incomebillion, Indian rupees

Tier 1 Tier 2

Ludhiana

Surat

Nagpur

Kanpur

Tier 3

MumbaiCoimbatore

Chandigarh

FaridabadAmritsar

Jallandhar

Goa

LucknowJaipur

Niche cities

Source: The Great Indian Middle Class, NCAER; McKinsey Global Institute

24

RURAL POVERTY WILL DECLINE SIGNIFICANTLY BY 2025

8

32

47

48

20

60 0000

2005E

1

46

875

2015F

12

29

906

2025F

Global (>1,000)682

Seekers (200–500)

Aspirers (90–200)

Deprived (<90)

100%

1995

1

90

0 1

1985

571

96

4 1 3

65

790


Share of rural population by income class%, millions



Middle class

25

PER-HOUSEHOLD CONSUMPTION IN RURAL INDIA WILL REACH TODAY'S URBAN LEVELS BY 2017

158

104

67

5045

116

Urban India,2005E

1985 1995 2005E 2015F 2025F

Average consumption per householdthousand, Indian rupees, 2000


Rural India

26

KEY FINDINGS






27

FALL IN SHARE OF SPENDING ON NECESSITIES IN INDIA IS COMPARABLE TO SOUTH KOREA'S DURING ITS HIGH-GROWTH PHASE

* Necessities include food and apparel; discretionary spending includes all other household spend categories.Source: Euromonitor; India data from McKinsey Global Institute

Discretionary spend*Necessities*

Share of average household spending %

Discretionary

Food

Apparel

0

25

50

75

100

1981 1986 19910

25

50

75

100

1985 1995 2005 2015 2025

History Forecast

South Korea India

Per capita income$, PPP, 2000

5,017 12,850 1,173 2,500 7,364

28

NUMBER OF URBAN HOUSEHOLDS WITH DISCRETIONARY SPENDING POWER TO MULTIPLY TWELVE TIMES

4458

6

29

118

2005E

23

49

2015F

794

2025F

Number of urban households with ‘true’ discretionary spending power*million


Globals (>1,000)


Seekers (200–500)


Middle class

* Consumers with sufficient budget to have significant levels of choice-driven spending (beyond categories such as food, housing, health care, education, fuel and transport services)

12x

29

INDIAN SPENDING PATTERNS WILL BE UNIQUEShare of total consumption, %

Note: Figures are rounded to the nearest integer and may not add up to 100%Source: Euromonitor, MGI China Consumer Demand Model v2.0, McKinsey Global Institute

• Food beverages and tobacco

• Apparel• Personal products and

services

In line with benchmarks15

414

21

510

19

68

23

413

35

114

42

68

25

511

U.S. Germany BrazilSouth Korea China

India(2005)

India(2025)

Consumption category

• Housing and utilities• Household products• Education and recreation

Less than benchmarks195

12

2778

229

13

184

16

96

15

1235

1039

• Transportation• Communication• Health care

More than benchmarks111

19

1714

1346

1228

677

1727

206

13

30

FOOD WILL REMAIN THE LARGEST CONSUMPTION CATEGORY WHILE COMMUNICATIONS WILL GROW THE FASTEST

0

2

4

6

8

10

12

14

16

0.0 1.0 2.0 3.0 4.0 5.0


(17.3)

Market size in 2025trillion, Indian rupees, 2000

Housing and utilities (6.6)

Household products (1.8)

Apparel (3.3)

Personal products (7.4)

Healthcare (8.9)

Communications (4.3)

Education and recreation (6.1)

Transport (13.8)


7.0 8.0

2005 market sizetrillion, Indian rupees, 2000

2005–2025 compound annual growth rate of aggregate consumption%

31

KEY FINDINGS






32

OPPORTUNITIES AND CHALLENGES FOR BUSINESSES

Opportunities• Along with China the fastest growing of world’s large consumer markets

over next two decades• Major discontinuity, winners have yet to be determined – $1.1 trillion of

new market growth not yet owned by anyone• Most accessible market – upper income urbanities – will grow twelve

times• Almost half of middle class will be ‘new consumers’ at any point in time –

loyalties up for grabs

Challenges• Indian companies

– Retaining existing customers and market shares– Adapting rapid pace of change– Innovating to capture new growth opportunities– Educating new consumers

• Multinationals– Meeting middle class aspirations at Indian price– Adapting products and services to meet Indian needs and task points– Building brands– Overcoming infrastructure, regulatory, and distribution hurdles

33

OPPORTUNITIES AND CHALLENGES FOR GOVERNMENT

Opportunities• A chance to make further significant inroads in poverty reduction• Domestic demand growth will spur further domestic production and

employment – particularly in higher value-added industries• An opportunity to attract FDC to serve Indian consumers• The potential to improve the material well-being of hundreds of millions

of people

Challenges• Long-term growth must be maintained• Infrastructure issues need to be addressed• Regulatory constraints on business need further reform to enable

businesses to meet growing demand and improve productivity• Financial system needs reform to efficiently allocate investment, re-

balance savings away from households and provide consumer credit• Significant investments in human capital required (education, health

care) in fiscally constrained environment

34

INCOME BRACKET CONVERSIONSHousehold annual disposable income, real 2000

Source: NCAER “The Great Indian Middle Class”; McKinsey Global Institute

Bracket Indian rupeesU.S. dollars non-adjusted

U.S. dollarsPPP adjusted

Globals

Strivers

Seekers

Aspirers

Deprived

1,000,000 plus

500,000–1,000,000

200,000–500,000

90,000–200,000

Less than 90,000

21,882 plus

10,941–21,882

4,376–10,941

1,969–4,376

Less than 1,969

117,647 plus

58,823–117,647

23,529–58,823

10,588–23,529

Less than 10,588

Middle class

35

BACK-UP

• Macroeconomic base case

• Urbanization, rural growth and education

• Additional results

36

MGI'S BASE-CASE GDP FORECAST IS MIDDLE OF THE RANGE

2.7

4.2

4.3

4.7

4.7

5.7

5.9

6.2

6.2

7.1

7.2

7.2Planning Commission–High

HSBC–High

Goldman Sachs–Base

HSBC–Base

Deutsche Bank–High

MGI/Oxford Economics–Base

Planning Commission–Base

EIU

Global Insight

PWC

Deutsche Bank–Base

Deutsche Bank–Low

Source Real per capita GDP growthCompound Annual Growth Rate, %

Source: Oxford Economics; India: Pitfalls and Possibilities, HSBC, July 2006; India's rising growth potential, Goldman Sachs, Jan 2007; India Rising: A Medium-Term Perspective, DB Research, May 2005; Towards Faster and More Inclusive Growth: An Approach to the 11th Five Year Plan, Planning Commission, Government of India, June 2006; The World in 2050: How Big will the Major Emerging Market Economies Get and How Can the OECD Compete?, PWC, 2006

Timeframe

2005–2015

2006–2020

2007–2012

2005–2025

2006–2020

2006–2020

2006–2025

2005–2025

2005–2050

2007–2012

2005–2015

2006–2020

37

SERVICES WILL CONTINUE TO BE THE MAIN DRIVER OF GDP GROWTH OVER THE NEXT TWO DECADES


24

26

2736

199

40

8.8

1985

55

28.3

2005E

65

115.3

2025F

Agriculture

Industry

Services

100% =

Share of GDP%, trillion, Indian rupees, 2000

2.7Agriculture

6.4Industry

7.8Services

3.1

7.4

8.2

2005–20251985–2005

Growth by sectorCompound annual growth rate, %

38

INCOME GROWTH WILL ACCELERATE WITH ECONOMIC GROWTH

5.75.7

1985–1995

6.06.3

1995–2005E

6.4

7.3

2005E–2015F

7.47.2

2015F–2025F

GDP versus household disposable income growthcompound annual growth rate, %, Indian rupees, 2000


GDP

Household disposable income

39

INDIA'S CONSUMPTION SHARE OF GDP IS CLOSER TO JAPAN AND THE UNITED STATES THAN IT IS TO CHINA

44

23 2820

14

18 1216

-6

Private consumption

Government consumption

39

Net trade

100% =

3

2,216

China

57

1

4,553

Japan

62

-2

801

India

70

12,456

UnitedStates

Investment

Source: Global Insight; McKinsey Global Institute

%, billion, nominal $, 2005

40* MGI estimate based on 2005 GDP and estimates of flow-of-funds information.

Source: Country National Accounts; IMF; McKinsey Global Institute

21,1

16,28,1

10,4 7,8

11,3

-0,5

10,27,3

21,3

6.4-1.3

26.4

Japan

7.92.9

21.2

Mexico

9.90.3

18.0

France

2.1

12.922.0

50.4

China*

22.3

2.0

32.4

India

6.4

32.8

South Korea

United States

Corporations

Households

Government

Gross national savings rates% of nominal GDP, 2005

INDIA HAS A RELATIVELY HIGH NATIONAL SAVINGS RATE COMPARED WITH OTHER COUNTRIES

41* MGI estimate based on 2005 GDP and estimates of flow-of-funds information.

Source: Country National Accounts; IMF; McKinsey Global Institute

Household savings as a share of gross national savings rates, 2005%

INDIAN HOUSEHOLD SAVINGS ACCOUNT FOR A DISPROPORTIONATE SHARE OF NATIONAL SAVINGS

1620

24

3744

55

69

India France China* Mexico Japan South Korea

United States

32.4 18.0 50.4 21.2 26.4 32.8 12.9

Gross national savings rates% of nominal GDP, 2005

42

INVESTMENT WILL GROW APPROXIMATELY IN LINE WITH GDP

Source: National Accounts; McKinsey Global Institute

Expenditure share of real GDP%

-10

0

10

20

30

40

50

60

70

80

1985 1990 1995 2000 2005 2010 2015 2020 2025

ForecastHistory

Private consumptionInvestmentGovernment consumptionNet trade

43

Government expenditures and revenues*

0

5

10

15

20

25

30

35

40

1985 1990 1995 2000 2005 2010 2015 2020 2025-11,0-10,0-9,0-8,0-7,0-6,0-5,0-4,0-3,0-2,0-1,00,01,02,03,0

GOVERNMENT SPENDING AND DEFICIT WILL GRADUALLY DECLINE AS A PROPORTION OF GDP

* Government expenditure figures are available through 2005.Source: McKinsey Global Institute

Government budget deficit

History Forecast

Revenues (left scale)Expenditures (left scale)

Deficit (right scale)% of GDP

44

BACK-UP




45

INDIA REMAINS LESS URBAN THAN ITS COUNTERPARTS IN ASIA, BUT DEFINITIONS VARY

Source: United Nations World Urbanization Prospects 2005; McKinsey Global Institute

81

696665

4840

2927

Vietnam India China Indo-nesia

Malaysia Japan United States

Korea, Rep.

Urban share of total population, 2005%

Urban population, 2005million

23 318 530 108 17 84 210 39

46

BIRTHS AND MIGRATION WILL DRIVE URBAN POPULATION GROWTH

Urban population, 2005–2025*million

105

100

523

318

Urban population, 2005E

Net births Netmigration

Urban population, 2025F

* Estimate of birth versus migration split assumes urban birth rate = 19 per 1,000 and death rate = 6 per 1,000Source: McKinsey Global Institute

1.6 x

Share of total population or urbanization rate

29% 37%

47

CLASSIFICATION OF CITIES AND TOWNS

* Population for each city estimated using the average urban household size (from MGI model) and the estimated number of households in each city from NCAER (in the year 2001).

Source: The Great Indian Middle Class, NCAER; McKinsey Global Institute

MumbaiKolkata, Delhi,

ChennaiBangaloreHyderabad

Ahemdabad, Pune

Surat, Kanpur, Nagpur, Lucknow, Jaipur, Kochi, Vadodara, Indore,

Ludhiana, Madurai, Bhopal, Patna, Nasik, Agra, Varanasi, Rajkot, Meerut,

Jabalpur, Dhanbad, Kozhikode . . . .

Tiruchirapalli, Amritsar, Faridabad, Aurangabad,Allahabad Gwalior, Jodhpur, Raipur, Bhubaneshwar, Goa, Pondicherry Aligarh, Moradabad, Mangalore, Gorakhpur,

Bhavnagar…

Rohtak, Rourkela, Udaipur, Anand, Faizabad, Hassan,Shimla, Roorkee, Gurgaon, Shillong…

Tier 1: Major cities

Tier 2: Mainstream cities

Tier 3: Climbers

Tier 4: Small towns

26 citiesPopulation >1 million

33 citiesPopulation >500,000

8 citiesPopulation > 4 million

Total income >100 billion Indian rupees

5,094 towns

48

HIGHER INCOME HOUSEHOLDS CONCENTRATED IN LARGE CITIES, POOR IN SMALL TOWNS

63

4327 25 22

9

9

98 8

Strivers

60

10

Deprived Globals

Tier 1: Major cities 15

13

47016,809

33

16

34,139

Aspirers

50

13

3,750

Seekers

55

12

806

Tier 2:Mainstream cities

Tier 3: Climbers

Tier 4: Small towns

100% =

Proportion of households in each income class across city tiers, 2001%, thousand, households

Note: Figures are rounded to the nearest integer and may not add up to 100%.Source: The Great Indian Middle Class, NCAER; McKinsey Global Institute

49

RURAL EMPLOYMENT HAS BEEN GRADUALLY SHIFTING AWAY FROM AGRICULTURE

7567

74

52

7

1987

87847

2004

Manufacturing Construction Trade, hotelsand restaurants Transport, storageand communication Others*

Agriculture

* Sectors with minimal shift in this period (6% in other services, 1% in mining, quarrying, electricity and water).Note: Figures are rounded to the nearest integer and may not add up to 100%.

Source: Employment and unemployment situation in India (2004–05), NSSO; McKinsey Global Institute

Distribution of rural male workers by economic activity%

50

AGRICULTURAL GROWTH IS FORECAST TO ACCELERATE FROM ITS RECENT HISTORICAL RATE

Agricultural value added in GDPbillion, Indian rupees, 2000


Compound annual growth rate

9,974

7,529

5,462

4,299

1995 2005E 2015F 2025F

2.4%

3.1%

51

* Enrollment is measured as a percentage of 15 to 24 year old population; attainment is measured relative to 15 and above population.


ACHIEVEMENT IN HIGHER AND SECONDARY EDUCATION WILL CONTINUE TO BECOME MORE WIDESPREAD

Rate of secondary-school and higher-education enrollment

Rate of secondary-school and higher-education attainment

0

5

10

15

20

25

30

35

40

1985 1995 2005 2015 2025

Secondary

Higher% of relevant population groups*

History Forecast History Forecast

0

5

10

15

20

25

30

35

40

1985 1995 2005 2015 2025

History Forecast

52

BACK-UP




53

77

54

2410

15

32

51

36

17

7 120

8

10,098

1995

6

12

16,896

2005E

8

35

34,089

2015F

6

24

35

3

69,503

2025F

20

6,6792

1985

15100% Globals (>1,000)


Seekers (200–500)

Aspirers (90–200)

Deprived (<90)

Middle class

INDIAN CONSUMPTION WILL BE DOMINATED BY THE MIDDLE CLASS

Share of total consumption by income bracket%, billion, Indian rupees, 2000



54

HALF OF URBAN CONSUMPTION WILL COME FROM UPPER INCOME STRIVERS AND GLOBALS

64

26

7

28

56

55

17

0100% 2

17

2.2

1985

26

10

4.0

6

1995

12

8

7.2

2005E

18

10

53

2

17.4

2015F

26

33

37

4

Global (>1,000)

1

43.1

2025F

Strivers (500–1000)

Seekers (200–500)

Aspirers (90–200)Deprived (<90)

Share of urban consumption by income class%, trillion, Indian rupees, 2000

Middle class



55

ASPIRERS WILL DRIVE RURAL SPENDING OVER THE NEXT TWO DECADES

8472

37

188

79

15

33

6

86 126

26.4

2025F

0


Seekers (200–500)

Aspirers (90–200)

Deprived (<90)

100%Global (>1,000)

2

9

4.5

1985

04

17

6.1

1995

34

55

47

9.7

2005E

16.7

2015F

39

Share of rural consumption by income class%, trillion, Indian rupees, 2000



56

CONSUMPTION BY ‘NEW-TO-BRACKET’ CONSUMERS WILL BE SIGNIFICANT, ESPECIALLY IN THE MIDDLE CLASS

* Calculated by determining the number of households that have shifted income class, assume they consume at new bracket levels in the first year, and then consider them ‘new’ to that bracket for three years.


‘New-to-bracket’ share of cumulative consumption 2005–2025*%, trillion, Indian rupees, 2000

78

57

59

89

Globals

Deprived 70.9

Aspirers

22 111.5

100% =

93.4Strivers

11 245.8

Seekers 41 262.6

43Middle class

‘New-to-bracket’consumersExisting consumers

57

FROM ASPIRER TO STRIVER – THE EVOLUTION OF SPENDING FOR A TYPICAL HOUSEHOLD

63 90

234248

119

47

46

69

40

24

49

13

22


ApparelHousing and utilitiesHousehold productsPersonal products and services

Transportation

Communication

Health care

716 7 211 5

94

Aspirer2005E

137

18612

Seeker2015F

13

497

Striver2025F

214

Education and recreation

Average household consumptionthousand, Indian rupees, 2000


58

SHARE-OF-WALLET ON FOOD IS ALREADY LOW IN MIDDLE- AND UPPER-INCOME BRACKETS

61 72 79

39

Aspirers

28

Seekers

21

Strivers

Food, beveragesand tobacco

Other spendingcategories

100%

42 53 65

58

Deprived

47

Aspirers

35

Seekers

Food, beveragesand tobacco


100%

5866

75

42

2005E

34

2015F

25

2025F

Food,beveragesand tobacco


100%

All India average share-of-wallet evolutionShare-of-wallet of urban households in 2005E

Share-of-wallet of rural households in 2005E

%


59* Approximately 90% of spend on the broad category “food, beverages, and tobacco” is on food.


FOOD CONSUMPTION WILL ACCELERATE SIGNIFICANTLY EVEN AS ITS RELATIVE SHARE DECLINES

3,931

1985

5,622

1995

7,147

2005E

11,547

2015F

17,296

2025F

3.0%

4.5%

Total consumption of food, beverages, and tobacco*billion, Indian rupees, 2000

Per-capita consumption of food, beverages, and tobacco*Indian rupees, 2000

12.102

9.035

6.4546.0585.207

1985 1995 2005E 2015F 2025F

1.1%

3.2%

Share of total consumption%

59 56 42 34 25 59 56 42 34 25

Compound annual growth rate

60

FIVE CATEGORIES WILL ACCOUNT FOR MORE THAN 80 PERCENT OF CUMULATIVE CONSUMPTION OVER THE NEXT 20 YEARS

Breakdown of total cumulative consumption across categories (2005–2025)trillion, Indian rupees, 2000


784

4154

Household productsCommunicationApparelEducation and recreation

Totalgrowth

248


148

Transport

87

Housingandutilities

79

Healthcare

74

Personalproducts and services

3222

148

Other

Mckinsey - The India consumer story

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