Income and Expenditure: India

Euromonitor International
October 2020
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LIST OF CONTENTS AND TABLES

HEADLINES ................................................................................................................................. 1
PROSPECTS ............................................................................................................................... 1
Youngest and oldest groups to enjoy the fastest-rising incomes .............................................. 1
Low-income earning group expected to grow in dominance by 2040 ....................................... 1
Urban regions will experience growth in discretionary categories ............................................ 2
Economic slowdown and the COVID-19 pandemic will subdue wealth consolidation............... 2
Chart 1 Annual Gross Income Distribution by Age in India: 2019 ............................. 2
Chart 2 Distribution of Income in India: Key Metrics 2019-2040 ............................... 3
Chart 3 Gross Income Growth Index in India 2019-2040 .......................................... 4
Chart 4 Average Gross Income by Age in India : 2019-2040 .................................... 4
Chart 5 Total Population and Population Aged 50+ by Income Brackets in
2040 ............................................................................................................. 5
Chart 6 Gini Index 2019/2040 ................................................................................... 5
Chart 7 Households by Disposable Income (PPP) over 2019-2040.......................... 6
Chart 8 Overview of India’s Social Classes............................................................... 6
Chart 9 Social Class E by Age: 2019/2040 ............................................................... 6
Chart 10 Consumer Market and Spending in India: Key Metrics 2040 ........................ 7
Chart 11 Consumer Expenditure by Region: Size in 2040 and Growth over
2014-2040 .................................................................................................... 7
Chart 12 Urban/Rural Consumer Expenditure in 2040................................................ 8
Chart 13 Households Expenditure in 2019 ................................................................. 8
Chart 14 Consumer Spending by Category in India 2019-2040: USD per
Household .................................................................................................... 9
Chart 15 Index of Consumer Prices in India over 2010-2019 ..................................... 9
Chart 16 Households Expenditure by Category in India: 2040.................................. 10
Chart 17 India’s Wealth Landscape: 2019-2030 ....................................................... 10

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INCOME AND EXPENDITURE: INDIA

Consumer income in India is anticipated to double by 2040, thanks to large-scale investments
in the manufacturing sector and rising domestic consumption. However, despite government
efforts, economic growth will moderate and subdue wealth accumulation. The rapidly-rising
population will also inflate low-income earner numbers and weaken the middle class. Essential
spending, therefore, will remain dominant, although large urban areas will provide more
prominent consumer segment growth.

HEADLINES
▪ Large income generating opportunities are transferring to the youngest part of the Indian
population, due to the emergence of advanced economic sectors over 2020-2040
▪ The lowest income earners are expected to show the highest increase in numbers at the
expense of the middle class in the country over 2020-2040
▪ The COVID-19 pandemic is set to have long-term implications for Indian income growth
▪ Urban regions like Uttar Pradesh and Maharashtra show robust consumer market growth,
with spending on transport becoming the fastest-growing category over 2020-2040
▪ India will climb to new highs in the Wealth Index by 2030, yet future expansion will be hurt by
the slowing economic performance of the country

PROSPECTS

Youngest and oldest groups to enjoy the fastest-rising incomes

India’s developing economy, boosted by foreign direct investment (FDI) and growing domestic
consumption, will help in doubling disposable incomes per capita over 2020-2040. Young
Adults, aged 15-24, are expected to enjoy the largest increases in incomes, thanks to rising IT
literacy, greater educational outcomes, and more flexibility in skills attainment and reskilling.
New developing sectors like information and communications technology (ICT), business
services, electronics, automotive and other advanced manufacturing will primarily seek talented
individuals from the new generation. Inadequate education and skills among older age groups,
which are employed in more traditional manufacturing sectors or are self-employed, are likely to
encounter smaller wage growth prospects.
Those aged 65+ will also become an increasingly important consumer group, thanks to
greater wealth accumulation opportunities by 2040. In addition to rising national pensions, in
2019, the Indian government launched the “Pradhan Mantri Shram Yogi Maan-dhan” (PM-SYM)
pension scheme to provide monthly INR3,000 payments to the workers, which are not part of
any other employee organisations. However, even with rising incomes among seniors, the
country’s social system will likely remain flawed and unstable. For a significant share of the
Indian population wealth accumulation will still be difficult, due to the long-lasting traditions of
hierarchy in the society.

Low-income earning group expected to grow in dominance by 2040

A rapidly-growing population in India and the economy’s chaotic expansion will continue
driving and dismantling social progress. Although India is one of the largest FDI recipients in the
world, the economic benefits are barely reaching the general population, with low productivity
and low-paying sectors remaining dominant. By 2040, nearly half of the Indian adult population

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over the age of 15 will belong to social class E, or the lowest income earners, which is one of
the lowest shares in the region. The COVID-19 pandemic will highly inflate the figure in the short
term, as a poor healthcare system and a rapidly-spreading pandemic in the country will cause
factory closures, lockdown measures, and place financial stress on the government’s budget.
Social classes C and D, the country’s middle classes, will face the largest decline in share
among all the country’s classes over 2020-2040. The weakening of the middle class will have a
negative impact on the consumer market in India, as essential goods categories are expected to
increasingly dominate due to limited consumer budgets. Consumer preferences will shift more
towards food, clothing, and similar goods, while discretionary goods and services will have less
potential for growth.

Urban regions will experience growth in discretionary categories

Over 2020-2040, consumer markets in India will be driven by a growing population in urban
centres. Cities like Delhi and states like Uttar Pradesh, Goa, Kerala and Punjab are attracting
significant investment in the manufacturing and service sectors, creating a layer of affluent
residents. The government’s investment programme “Make in India” already yields results in
attracting investment via tax breaks, government support, market liberalisation, and investment
in infrastructure. The process can be expected to intensify if the USA-China trade dispute
continues and Western companies search for new investment destinations to produce goods
outside of China.
In 2040, just like in 2019, the main spending categories will remain essential goods like food,
clothing and housing, accounting for nearly half of household budgets on average. Consumers
in the largest regional markets like Uttar Pradesh and Maharashtra and other rapidly urbanising
areas, however, will increasingly spend on discretionary goods. Transportation, needed for
mobility around urbanised areas will become the fastest-growing spending category in India
over 2020-2040. While wages in India are expected to remain low throughout the forecast
period, one of the highest remittance inflows globally will support greater discretionary market
development.

Economic slowdown and the COVID-19 pandemic will subdue wealth

consolidation
India is quickly climbing the wealth ladder, reaching 20th position among 84 countries in 2019,
up from 35th as of 2018. The country’s wealth is increasingly being accumulated by large
corporate leaders in energy, commodities, pharmaceuticals, and ICT. The country’s developing
economy and emerging new sectors also form a new layer of highly affluent people in a more
diverse range of activities like consumer goods, who will have a huge impact on the country’s
luxury market development in the future.
Nevertheless, the future for wealth accumulation in India has mixed expectations. On one
hand, a growing economy and rising urbanisation will provide a basis for wealth creation and
growth of luxury markets. On the other hand, the COVID-19 pandemic will exacerbate the
already slowing economic growth in the country, possibly eliminating several years of progress.
Furthermore, luxury real estate prices and the stock market’s performance in India are posting
mediocre returns, which will result in wealth degradation over the longer period. Therefore,
mixed growth potential for wealth consolidation in India will likely result in the country’s lower
position in Wealth Index rankings by 2030.

Chart 1 Annual Gross Income Distribution by Age in India: 2019

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Source: Euromonitor International from national statistics

Chart 2 Distribution of Income in India: Key Metrics 2019-2040

Source: Euromonitor International from national statistics

Note: Data for 2020-2040 are forecasts

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Chart 3 Gross Income Growth Index in India 2019-2040

Source: Euromonitor International from national statistics

Note: Data for 2020-2040 are forecasts

Chart 4 Average Gross Income by Age in India : 2019-2040

Source: Euromonitor International from national statistics

Note: Data for 2020-2040 are forecasts

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Chart 5 Total Population and Population Aged 50+ by Income Brackets in 2040

Source: Euromonitor International from national statistics

Note: Data for 2020-2040 are forecasts

Chart 6 Gini Index 2019/2040

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Source: Euromonitor International from national statistics

Note: (1) Data for 2020-2040 are forecasts
(2) A society that scores 0% on the Gini index has perfect equality, where every inhabitant has the same income.
The higher the number over 0%, the higher the inequality, and a score of 100% indicates total inequality,
where only one person receives all the income. A score above 40.0% indicates severe income
inequality.

Chart 7 Households by Disposable Income (PPP) over 2019-2040

Source: Euromonitor International from national statistics

Note: Data for 2020-2040 are forecasts

Chart 8 Overview of India’s Social Classes

Source: Euromonitor International from national statistics

Note: (1) Data for 2020-2040 are forecasts
(2) Social classes present data referring to the number of individuals with a gross income A - over 200%, B -
between 150% and 200%, C - between 100% and 150%, D - between 50.0% and 100%, E - less than
50.0% of an average gross income of all individuals aged 15+.

Chart 9 Social Class E by Age: 2019/2040

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Source: Euromonitor International from national statistics

Notes: (1) Data for 2020-2040 are forecasts
(2) Social classes present data referring to the number of individuals with a gross income A - over 200%, B -
between 150% and 200%, C - between 100% and 150%, D - between 50.0% and 100%, E - less than
50.0% of an average gross income of all individuals aged 15+.

Chart 10 Consumer Market and Spending in India: Key Metrics 2040

Source: Euromonitor International from national statistics

Notes: Data for 2020-2040 are forecasts

Chart 11 Consumer Expenditure by Region: Size in 2040 and Growth over 2014-2040

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Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Notes: Data for 2020-2040 are forecasts

Chart 12 Urban/Rural Consumer Expenditure in 2040

Source: Euromonitor International from Eurostat/national statistics

Note: Data for 2020-2040 are forecasts

Chart 13 Households Expenditure in 2019

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Source: Euromonitor International from national statistics

Note: Data for 2020-2040 are forecasts

Chart 14 Consumer Spending by Category in India 2019-2040: USD per Household

Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Note: Data for 2020-2040 are forecasts

Chart 15 Index of Consumer Prices in India over 2010-2019

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Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Note: Data for 2020-2040 are forecasts

Chart 16 Households Expenditure by Category in India: 2040

Source: Euromonitor International from national statistics

Note: Data for 2020-2040 are forecasts

Chart 17 India’s Wealth Landscape: 2019-2030

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Source: Euromonitor International’s Income and Wealth Distribution Model

Notes: 1) Euromonitor International’s proprietary Wealth Index is a measure of the present and future potential
of high-value and luxury consumer markets across 84 key countries. It was built from 21 indicators
covering wealth, consumer expenditure, savings, households, insurance and pensions. Each indicator
was assigned a weighting based on its perceived importance. The Index is expressed in 2019 and 2030
values.
2) The C19 Pessimistic1 scenario assumptions include: a major second global pandemic wave followed by
a possible 3rd wave; an effective vaccine or treatment for COVID-19 is available around the middle of
2021 while 2020 global GDP growth ranges from -7.5% to -5.5%; global virus infection rates are 5-25%,
with infection mortality rates of 0.3-1.3%; COVID-19 related significant social distancing effects last for 4-
6 quarters. Estimated probability: 25-35% over a one-year horizon.

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