Leading Global Growth
India has been outshining other leading global economies, primarily due to the robust performance of its service and industrial sectors, despite challenges in agriculture caused by inadequate rainfall. The country's Gross Domestic Product (GDP) for the quarter ending September 30 showed a 7.6% increase from the previous year, as per the latest government figures. This growth is only marginally lower than the 7.8% increase seen in the previous quarter.
- Rahul Bajoria, Managing Director and Chief India Economist at Barclays India in Mumbai, highlighted that India's impressive economic growth is largely driven by domestic demand, government investment, and strong consumer confidence.
- He pointed out that indicators like credit growth, electricity consumption, and mobility all reflect the economy's robustness.
Economists predict that India will continue to be among the fastest-growing major economies in the world.
China Falls Back And India Leads
In comparison, China's economy is projected to grow by 5.4% in 2023, based on the International Monetary Fund’s latest forecast, which is an improvement from earlier predictions. The IMF estimates India's economic growth at 6.3% for the fiscal year ending March 31, slightly below the 6.5% forecast by India's central bank.
- Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank in Mumbai, views India's economic growth as steady and stable, crediting the manufacturing sector's resilience despite high interest rates.
- She also noted strong performance in construction, positively impacting infrastructure sectors like cement and steel.
- Recent data suggests sustained consumer spending in urban areas, especially during the upcoming festive season, which typically boosts household expenditure. For instance, domestic passenger vehicle sales in India saw a 15.9% increase in October year-over-year, according to the Society of Indian Automobile Manufacturers.
Third Largest Consumer Market
India is poised to become the world's third-largest consumer market by 2027, driven by a significant increase in middle to high-income households, as per a report by BMI. Currently ranking fifth, India is expected to see a 29% rise in real household spending, moving it up two places in the global rankings. The report projects that India's per capita household spending growth will surpass that of other developing Asian economies like Indonesia, the Philippines, and Thailand, with an annual increase of 7.8%.
- This growth will widen the spending gap between the ASEAN region and India, which is forecasted to nearly triple. BMI estimates that India's household spending will surpass $3 trillion, with an annual compounded increase in disposable income of 14.6% until 2027.
- By then, about 25.8% of Indian households are expected to have an annual disposable income of over $10,000. The majority of these affluent households will be in economic hubs such as New Delhi, Mumbai, and Bengaluru, predominantly in urban areas.
Youth Driven Consumer Demand
India's large youth population, approximately 33% of which is aged between 20 and 33, is also a key factor in this consumer spending surge. This demographic is anticipated to significantly increase spending on electronics, with communications spending expected to grow by 11.1% annually to $76.2 billion by 2027.
- This growth is attributed to a technology-literate, urban middle class with rising disposable income, favoring aspirational products like consumer electronics.
- Urbanization trends in India are further aiding consumer spending growth, making it easier for companies to reach consumers and open more physical retail stores.
Recently, Apple opened two stores in Delhi and Mumbai, and Samsung announced plans to establish 15 premium experience stores across major cities by year's end. Additionally, global investors such as Blackstone Group and APG Asset Management are increasingly investing in India's shopping mall business, aiming to capitalize on the country's consumer spending growth.
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