India’s Consumption Story: Rising Aspirations, Thriving Markets
![India’s Consumption Story: Rising Aspirations, Thriving Markets](https://www.smallcase.com/wp-content/uploads/2023/02/GIMC-4.jpg?x84842)
The National Sample Survey Office of the Indian Government regularly conducts the Household Consumption Expenditure Survey (HCES). The summary of the level of household consumption expenditure is measured by Monthly Per Capita Consumption Expenditure (MPCE). The survey covers more than 2. 61 lakh households across the whole of India.
The primary aim is to gather data on the consumption spending of households across various expenditure categories such as food, clothing, health, education, and other goods and services. This information is crucial for understanding living standards, poverty levels, and the economic well-being of the population.
The most recent survey results throw up some interesting insights.
- Rural India is growing fast and catching up
1999-00 | 2004-05 | 2009-10 | 2011-12 | 2022-23 | |
Rural | 486 | 579 | 1054 | 1430 | 3773 |
% growth | 19.1% | 82.0% | 35.7% | 163.8% | |
Urban | 855 | 1105 | 1984 | 2630 | 6459 |
% growth | 29.2% | 79.5% | 32.6% | 145.6% | |
Difference as % of rural MPCE | 75.9 | 90.8 | 88.2 | 83.9 | 71.2 |
While metro cities continue to be a large contributor of India’s consumption spends, it is important to highlight that spending is reaching the grassroots as well amping up overall consumption spending. This long-term trend is also driving down inequality between urban and rural India.
- Engel’s law comes into play : as income increases, percentage of income spent on food declines
Rural | Urban | |||
Period | % share of cereals in avg. MPCE | % share of food in avg. MPCE | % share of cereals in avg. MPCE | % share of food in avg. MPCE |
1999-00 | 22.23 | 59.40 | 12.39 | 48.06 |
2004-05 | 17.45 | 53.11 | 9.63 | 40.51 |
2009-10 | 13.77 | 56.98 | 8.16 | 44.39 |
2011-12 | 10.75 | 52.90 | 6.66 | 42.62 |
2022-23 | 4.91 | 46.38 | 3.64 | 39.17 |
Key consumption trends
- Indians moving beyond roti, kapda and makan
Trend in percentage composition of MPCE | |||||
% share in total MPCE | |||||
Rural | 1999-00 | 2004-05 | 2009-10 | 2011-12 | 2022-23 |
toilet articles & other household consumables | 4.73 | 4.83 | 4.02 | 4.01 | 5.12 |
durable goods | 2.62 | 3.95 | 3.69 | 4.85 | 6.89 |
Urban | |||||
toilet articles & other household consumables | 5.50 | 4.65 | 3.88 | 3.88 | 4.98 |
durable goods | 3.61 | 4.46 | 4.31 | 5.60 | 7.17 |
As India’s GDP per capita rises, spending on FMCG and consumer durables has increased. The FMCG industry reached $121.8 billion in 2023, with urban areas contributing 65% and rural areas 35% of sales. Growth is driven by shifts to organized markets and e-commerce. Consumer durables demand is rising due to higher incomes, urbanization, and a growing middle class. Increased discretionary income and easy financing have shortened product replacement cycles, making items like ACs and LCD TVs more common. Policies like the PLI Scheme and National Policy on Electronics 2019 further support sector growth.
- Entertainment is no longer a luxury
Trend in percentage composition of MPCE | |||||
% share in total MPCE | |||||
1999-00 | 2004-05 | 2009-10 | 2011-12 | 2022-23 | |
Rural – Entertainment | 0.42 | 0.60 | 0.79 | 0.99 | 1.09 |
Urban – Entertainment | 1.16 | 1.79 | 1.60 | 1.61 | 1.58 |
India’s Media & Entertainment (M&E) sector has evolved into an omni-channel industry meeting the growing consumption needs of a diverse audience. Rural spending on entertainment is closing the gap with urban areas. In 2023, the sector grew by 8% to ₹2.3 lakh crore and is projected to reach ₹3.1 lakh crore by 2026, driven by higher household spending post-pandemic. Growth areas include cinema, niche OTT platforms, and curated content, with more consumers willing to pay for differentiated content through subscription models.
- Rise of the travel economy
Trend in percentage composition of MPCE | |||||
% share in total MPCE | |||||
1999-00 | 2004-05 | 2009-10 | 2011-12 | 2022-23 | |
Rural – conveyance | 2.94 | 3.63 | 3.45 | 4.20 | 7.55 |
Urban – conveyance | 5.52 | 6.21 | 5.63 | 6.52 | 8.59 |
The rise of millennials and increasing per capita incomes in India are driving a shift from goods consumption to experiences, particularly in travel and leisure. Spending in aviation has surged by 27.42% from FY22 to FY24, with India becoming the third-largest domestic aviation market. The government plans to increase the number of operational airports from 148 to 220 by FY25. Similarly, railway sector spending grew by 56.35% in the same period, boosted by significant increases in both freight and passenger traffic post-pandemic.
Conclusion
India, a diverse and rapidly evolving nation, is experiencing rising per capita incomes and thriving urban, semi-rural, and rural centers, leading to increased consumption nationwide. Regions such as Delhi, Uttar Pradesh, Karnataka, and Tamil Nadu are emerging as consumption hotspots. However, economic and consumption growth varies significantly across states, influenced by factors like state GDP, employment rates, and digital adoption. Despite these disparities, India is projected to become the world’s third-largest economy by 2027 and the third-largest stock market by 2030, driven by strong domestic demand.
Source :
- CMS CONSUMPTION REPORT 2024 : Unfolding India’s Consumption Story
- https://www.mospi.gov.in/sites/default/files/publication_reports/Factsheet_HCES_2022-23.pdf
- https://www.ibef.org/download/1714543650_FMCG_March_2024.pdf
- https://www.ibef.org/download/1714542902_Consumer_Durables_March_2024.pdf
Disclaimer: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of a SEBI recognized supervisory body (if any) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy/sell any security or financial products.Users must make their own investment decisions based on their specific investment objective and financial position and using such independent advisors as they believe necessary.
Windmill Capital Team: Windmill Capital Private Limited is a SEBI registered research analyst (Regn. No. INH200007645) based in Bengaluru at No 51 Le Parc Richmonde, Richmond Road, Shanthala Nagar, Bangalore, Karnataka – 560025 creating Thematic & Quantamental curated stock/ETF portfolios. Data analysis is the heart and soul behind our portfolio construction & with 50+ offerings, we have something for everyone. CIN of the company is U74999KA2020PTC132398. For more information and disclosures, visit our disclosures page here.