Page 106 - Nuvama | IC Report 2023

• MANUFACTURING • NEW ENERGY • URBANISATION • CONSUMPTION PREMIUMISATION • EQUITY SAVINGS CULT

Consumption curve: A premium touch

Till the 1980s, India’s economic growth hardly kept up with population growth. Income levels were
low and the standard of living was poor. Food was scarce for many and consumption was largely
subsistence-oriented (basic food and clothing—‘roti aur kapda’). Policy was also geared towards food
security with substantial resources earmarked for raising agricultural output (HYV seeds, fertiliser and
fuel subsidies).
All this began to change in 1991, courtesy liberalisation reforms. Growth rates perked up, living standards
began to improve and consumption of goods outside the subsistence set (two wheelers, basic FMCG
An expanding
young population goods for instance) started to expand. Since then, the improvement in standard of living of Indian
and rising incomes households has been unprecedented.
shall enable Now, as India looks ahead to the next decade backed by its endowments – favourable demography, low
India’s aspirational debt – and a shifting global order in its favour, a tremendous opportunity is waiting to unfold—economic
households to progress accompanied by a notable improvement in the well-being of its citizens. An expanding young
increasingly upgrade population and rising incomes shall enable India’s aspirational households to increasingly upgrade
their lifestyles
their lifestyles. This wouldn’t just drive up consumption, but premiumise it.

Premiumisation – What’s feeding it?

In our view premiumisation is likely to be driven by a combination of three factors: rising incomes and
affordability, urbanisation and expanding young population, and low household debt. We discuss the
three in detail in this section.

Exhibit 1:
Deciphering
drivers of Rising incomes & affordability
consumption
premiumisation

Expanding urbanisation Low household
and young population Drivers of debt
premiumisation
of consumption

Source: Nuvama Research

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