One billion people do not have real money to spend, says the report

India is the home of 1,400 million people, but around one billion among them do not have enough money to spend on discretionary goods or services, a New report Estimates

The country’s consumption class, which is effectively the potential market for new companies or business owners, is as large as Mexico, 130-140 million people, according to the Blume Ventures report, a risk capital firm.

There are another 300 million “emerging” or “applicants” consumers, but they are reluctant that have only begun to open their bags, since digital payments of clicking a button make it easy to make transactions.

In addition, the class of consumption in the third largest economy in Asia is not “expanding” as much as “deepening”, according to the report. What basically means that the rich population of India is not really growing in number, although those that are already rich are becoming even richer.

All this is shaped to the country’s consumer market differently, particularly accelerating the tendency of “premiumization” where brands drive growth by duplicating expensive and improved products that serve the rich, instead of focusing on offers of mass market.

This is evident in the zoom of sales of closed housing of ultra luxury and premium phones, even when its low -end variants fight. Affordable homes now constitute only 18% of the general market of India compared to 40% five years ago. Brand products are also capturing a greater market proportion. And the “experience economy” is booming, with expensive entrances for concerts by international artists such as Coldplay and Ed Sheeran selling as hot cakes.

The companies that have adapted to these shifts have prospered, said Saxith Pai, one of the authors of the report, to the BBC. “Those who are too concentrated in the massive end or have a mixture of products that have no premium end that have lost market share.”

The reports of the report reinforce the opinion that the post-pandemic recovery of India has been in the form of K, where the rich have become richer, while the poor have lost the purchasing power.

In fact, this has been a long -term structural trend that began even before pandemic. India has become increasing It is reduced from 22.2% to 15%.

However, the last drop in consumption has deepened not only a destruction in purchasing power, but also a precipitate fall into financial savings and the increasing indebtedness between the masses.

The Central Bank of the country has also taken energetic measures against easy loans without guarantee that underwent the demand after the Covid pandemic.

Much of the consumption spending of the “emerging” or “applicants” Indians was directed by such loans and “turning off that touch will definitely have some impact on consumption,” Pai said.

In the short term, two things are expected to help the expense boost: a collection in rural demand in the back of a record harvest and a tax turn of $ 12 billion in the recently completed budget. It will not be “dramatic”, but could boost the GDP of India, largely driven by consumption, in more than half percent, says Pai.

But there are large winds against long term.

The middle class of India, which has been an important engine for consumer demand, is being squeezed, with salaries that remain plans, shows the data compiled by Marcellus investment administrators.

“The average 50% of the Indian tax population has seen that their income stagnates in absolute terms during the last decade. This implies a half of the income in real terms (adjusted by inflation),” according to the reportPosted in January.

“This financial hammer has decimated the savings of the middle class: the RBI (Bank of the Reserve of India) has repeatedly stood out that the net financial savings of Indian homes are approaching a minimum of 50 years. This blow suggests that The products and services associated with the middle class home are likely that spending in front of a difficult time in the coming years, “he adds.

Marcellus’s report also indicates that urban white collar works are becoming more difficult to achieve, since artificial intelligence automates the clerical work, secretary and other type of routine. “The number of supervisors used in manufacturing units (as a percentage of all employees) in India has decreased significantly,” he adds.

The recent government Economic survey He has also marked these concerns.

He says that labor displacement as a result of these technological advances is of particular concern for an economy mainly driven by services such as India, where a significant part of IT workforce is used in the sectors of low -added value services that are more prone to interruption.

“India is also a consumption -based economy, therefore, the fall in consumption that can result from the displacement of its workforce will surely have macroeconomic implications. If the worst projections materialize, this could have the potential to establish economic growth of the country.

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