Page 107 - Nuvama | IC Report 2023

INDIA: THE 5D ADVANTAGE

Rising incomes and affordability
At low income levels, a big chunk of spending goes towards meeting basic needs, particularly food.
But as the economic pie expands and incomes as well as certainty of incomes rise, households
tend to increase their standards of living, thereby setting in motion overall discretionary spending.
For example, an average Indian allocates ~30% of their total spend on food, whereas a US citizen, on
average, spends less than 10% of total on food. Similarly, nearly 70% of US citizens own cars compared
to only 10% in India. Exhibit 2:
As incomes rise,
consumption
United States moves up
700 Japan Africa from basic to
Road vehicles (per 1000 inhabitants) 500 Belize Barbados Russia South Korea North America
Asia
discretionary
600
items such as cars
Europe
United Kingdom
Oceania
Bulgaria
400
South America
300
Brazil
1.2B
400M
200
China
Kiribati
100
India
Hong Kong
Population
San Marino
0 Niger Ethiopia Nepal Mauritania Egypt Gabon Turkey Singapore Dots sized by
$1,000 $2,000 $5,000 $10,000 $20,000 $100,000
GDP PER CAPITA
Source: NationMaster (2014), Our World in Data
Furthermore, given India’s focus on expansion of manufacturing and infrastructure, fruits of economic
expansion would be more widely shared, leading to expansion in the middle/upper-middle income
class. This would spur affordability and – in due course – demand for premium products.
Households
219M 293M 386M Exhibit 3:
Improving
affordability –
High High High A corollary of rise
1M (1%) 8M (3%) 29M (7%) in high and upper
High Income &
Upper Middle middle-income
Upper Upper mid Upper mid Income Segment segments
mid
16M (7%) 61M (21%) 168M (44%)
• 1 in 4 households
today
Lower mid Lower mid Lower mid • 1 in 2 households
51M (23%) 97M (33%) 132M (34%) by 2030
~70 million fewer
low income
Low Low Low households
151M (69%) 127M (43%) 57M (15%) by 2030
2005 2018 2030 forecast
Source: PRICE Projections based on ICE 360 Surveys (2014, 2016, 2018)

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