Drivers Of Consumption Driven Growth In India
Investors India|March 2019

Consumption is spending for acquisition of utility as opposed to investing which is spending for acquisition of future income.

Dr. Jyotsna Joshi
Drivers Of Consumption Driven Growth In India

Whenever there is a lag in investments in an economy, consumption plays a vital role in it by driving economic growth. Basically, Consumption is financed by savings, rather than higher disposable income.

India has embarked upon the most compelling growth story in the world by contributing 15% to the global growth. The booming consumer market and favorable demographic profiles confirms that India’s growth story would be the most compelling one.

The biggest impetus driving growth in India is its exceptional increase in the number of middle class that has led to stimulate consumption led growth. This consumption-led model is further going to rise in forthcoming years and will eventually keep the growth process up.

If we talk about the figures then Domestic consumption in India surged 3.5 times from 31 trillion to 110 trillion in the last decade, according to a report jointly issued by the Boston Consulting Group and Retailers Association of India. Further estimated it will touch 335 trillion by 2028. As per the BCG reports, Households with annual income from Rs.5-20 lakhs contributed 43% of the Rs.10 trillion annual consumption in India in 2018.

The fact brought up by Finance Minister Arun Jaitley that the Chinese ability for low cost manufacturing, is a fact that impacted the world, India’s impact will be on the strength of its consumption is actually undeniable.

Today, India stands at par with other major economies in terms of growth. Infact, when other economies are slowing down, it has retained its position of the fastest growing economy, amid national and international conflicts. The rising salaries, urbanization, shifting priorities, and higher disposable income are some of the major reasons that are contributing towards the rise in domestic consumption.

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