The increase in wealth among affluent Indians has led to a rise in top-end consumption in the country. Categories including leisure, jewelry, out-of-home dining, healthcare, and premium brands are expected to reap the benefits.
New Delhi: Wealthy or affluent Indians are likely to number 100 million in the next four years, and there are only 14 countries across the globe with a population of 100 million-plus. These countrymen, who have already played a crucial role in reshaping consumer trends and wealth dynamics, will have a bigger impact on the luxury goods and stock market. According to a recent Goldman Sachs report titled ‘The Rise of Affluent India,’ affluence is defined as an income exceeding $10,000 per annum or Rs 8.3 lakh in current exchange rates. The analysis stated that the class numbers are 60 million but will increase by a massive 67 percent to 100 million by 2027.
In the current scenario, around 4 percent of the working population earns more than 10,000 dollars per annum (a figure almost five times the per capita income of $2,100, around Rs 1,75,000), as per the report. The class has increased fast with 12 percent compound annual growth between 2019 and 2023, compared with 1% increase in population in the same period.
The rapid growth in affluence has also meant a sudden increase in financial and physical assets, including property, equities, and gold during the last three years. “The increase has been the largest for equities and gold, while property prices have seen a higher rate of appreciation in the last three-four years,” it said.
Goldman analysts highlight a massive surge, with demat accounts experiencing a 2.8-fold increase to 114 million in 2023. This growth is reflected in stock ownership (specifically BSE 200 stocks) and investments in mutual funds. Furthermore, the value of gold held by Indians has witnessed a remarkable 63% increase, reaching $1.8 trillion between 2019 and 2023.
A substantial surge in demand for premium products such as FMCG, footwear, fashion, passenger vehicles and two-wheelers has led to good and satisfactory performance by companies focused on top income consumption. Sectors that are churning good profit are jewellery, travel, premium retail and pricey healthcare.
Utilizing credit card spending as an indicator of consumption among affluents, the report highlights 80% increase in credit card ownership since the financial year 2019. Concurrently, credit card spending has surged by an impressive 250% over the same period (calculated based on the trailing 12-month average).?
As per Goldman analysts, the top-end consumption boom will stay and jewellery, institutional medical services and durables are sectors that will churn profits as affluence grows. The report also debunked coronavirus as a factor. “The initial hypothesis was that the divergence in consumption for companies that address top-end consumption compared to those that address broad-based consumption was due to the impact of Covid restrictions. Covid restrictions had a greater impact on low-income jobs like those in the service industries, such as, hotels and restaurants. However, Covid restrictions were fully lifted in early 2022, and yet the divergence in growth rates has continued till the end of 2023. We are now 24 months post the lifting of all restrictions, and most services shut down during Covid have fully opened up. The divergence was not just caused by Covid restrictions, but by fundamentally faster growth of ‘Affluent India’…”
The Goldman report highlighted potential risks, including changes in the central government’s tax policy, corrections in stock and gold prices, and increased competition for established companies from new entrants.