A Tale Of Two India’s: Can The Elephant Rise Together
India needs to move a significant portion of its rural population to urban areas for better income and opportunities
India's economic rise has been nothing short of remarkable.
Central to India’s growth narrative is the critical role of domestic consumption. However, a closer look reveals a story fuelled not just by overall growth, but by the spending habits of a select few. The socioeconomic landscape is defined by disparities in wealth and opportunity, the narrative of its economic trajectory oscillates between potential and disparity.
*A Segmented and fragmented Consumer Landscape
While the top strata enjoy a lifestyle mirroring developed nations, a vast majority struggles to meet basic needs. This stark disparity in consumption patterns presents a fundamental challenge – can India achieve sustainable economic prosperity without first achieving inclusive growth?
India's consumer landscape is a fascinating tapestry woven from threads of immense wealth and pervasive poverty.
At the pinnacle of India's economic pyramid rests its affluent class, a compact five per cent – roughly 70 million strong, comparable to the population of France or the UK. Enjoying an average per capita income of ?30-40 lakh annually, this influential group wields significant financial clout. They are the prime movers behind India's luxury market, fuelling demand for premium services and high-end education.
The next 15 per cent, similar in size to Brazil, and numbering approximately 200 million represent the "rich and well-to-do," They are early Adopters, Comfort Seekers and endowed with discretionary income and invest in both financial and non-financial assets, luxury items, education, holidays and healthcare. They drive sectors like FMCG, affordable housing, and public transportation.
*The Middle: The Growth Engine, waiting to be Unleashed
Comprising roughly 250 million people, or a fifth of the population, India's value-conscious consumers occupy a crucial space between the affluent and the underprivileged. Their per capita income, ranging from $3,000 to $5,000, positions them economically similar to countries like Indonesia. This significant segment forms the backbone of essential consumption in India, driving demand for a wide range of goods and services.
While they enjoy some disposable income, their spending leans towards frugality, requiring careful budgeting. Unlike the wealthiest segment, discretionary purchases are a rare indulgence. Basic necessities like food, clothing, and affordable housing take priority, leaving minimal room for luxuries. Education is a significant investment for this group, often demanding budget-conscious choices in schools and additional tutoring. This dedication to education fuels social mobility and holds the potential to propel future generations towards a more affluent future. Similarly, healthcare relies heavily on basic, often public, services due to financial constraints. Their transportation choices reflect this focus on cost-effectiveness, with public transport and two-wheelers dominating their options.
The value-conscious consumer segment plays a vital role in India's economic development. Their growing numbers and purchasing power contribute significantly to domestic demand, creating a fertile ground for businesses catering to essential needs and value-driven products. Their aspirations for a better future also drive economic activity as they seek opportunities for upward mobility. Additionally, their focus on education for the next generation fosters a more skilled workforce, further contributing to long-term economic growth.
*The Consumption Challenge and the Ripple Effects
The vast majority, roughly 60 per cent of India's population, falls into the category of ‘essentials buyers or subsistence consumers’. Many households amongst them are self-employed. This segment grapples with limited resources and prioritises necessities. Bridging this income gap through inclusive policies is crucial to expand the consumer base and create a foundation for sustainable economic growth.
India's economic ascent faces a stark paradox – a burgeoning middle class coexisting with a vast majority, roughly 60 per cent, struggling with limited spending power restricts overall demand, stifling mass-market industries This disparity in consumption patterns not only undermines the aspirations of millions but also hinders economic mobility as low income translates to limited access to quality education, healthcare, and financial services and restricts the nation's path to sustainable development.
*Empowering the Underserved for Participation
The foundation for India's sustainable growth lies in empowering those with limited resources. With a young population as its "demographic dividend," India can harness this potential by equipping youth with relevant skills, ensuring they avoid low-productivity cycles. Promoting stable employment opportunities in manufacturing and services is crucial to elevate income levels and employability.
Microfinance initiatives empower individuals to embark on entrepreneurial ventures, fostering a culture of savings and building financial resilience. Investments in affordable healthcare and quality education are equally important. A healthy, educated workforce is more productive and better prepared for the evolving job market. Upgrading infrastructure in transportation and housing further reduces living costs and improves overall quality of life, contributing to greater economic mobility.
Inclusive growth requires a broader vision beyond income augmentation. Female labour force participation remains low despite global progress, yet studies show increased female participation strengthens GDP.
India needs to move a significant portion of its rural population to urban areas for better income and opportunities. Urban migration can provide access to improved education, healthcare, and employment. Simultaneously, agricultural reforms are crucial to enhance farmers' incomes and quality of life. Fostering a vibrant business ecosystem, particularly for MSMEs, can catalyse entrepreneurial activity and create employment opportunities, driving sustainable growth.
*Beyond Income: Pillars of Inclusive Growth
India's economic success rests on its ability to bridge the gap and foster inclusive growth. Championing policies that prioritise income augmentation, enhance access to opportunities, and createing an environment conducive to economic participation for all can pave the way for a future where prosperity is shared. This holds the key to unlocking India's true economic potential, transforming the nation into a vibrant and equitable economic powerhouse.
