At 61 million, comprising 21% of existing households today, the number of upper middle-income households will more than double to 168 million — or 44% of the total households in the country — in the next 12 years, Bain & Company partner Nikhil Prasad Ojha told TOI. The outcome of this economic transformation, said Ojha, will be most evident in low-income households (see graphic). The 127 million low-income households in 2018 (which form 43% of India’s total households) are expected to reduce to 57 million — just 15% of the total — by 2030. In the same period, lower middle-class income households will see a marginal rise from 97 million (33% of total households) currently to 132 million (34%).
Organisations cutting across consumer-facing industries would gain from more households having better disposable incomes. “This is music to the ears of the consumer durables industry,” said Vijay Sales managing partner Nilesh Gupta. “The increase in the upper middle-class income to 44% of total households means that the average ticket price would go up drastically. As we all know, it is the evolving group of people who embrace premium brands as soon as they can afford it. Hence, we would see the sale of premium brands and premium products going up significantly. Looking at the scenario, I think we could also see an increase in activity levels of super premium brands like Miele, De Longhi and many more such brands,” said Gupta. Products like dishwashers, high-end vacuum cleaners, 100% clothes dryers, hobs and chimneys would find more takers with the economic transformation. Gupta said there is also a possibility of “premium-only” stores coming up in the metros. “As the middle-class income households increase, the low penetration of consumer durables industry would be a thing of the past,” he added.
As purchasing power increases, households would aspire to own cars as well. According to Mahindra & Mahindra chief people officer Rajeshwar Tripathi, an enhanced purchasing capacity primarily impacts sale of automobiles in two ways: While customers become choosy, aspiration levels escalate in terms of taste, comfort and features. The auto industry could benefit from a portfolio of cars in the mid to high end of the price pyramid.
There is already a clear shift in demographics with a visible increase in double-income families. “Salary levels, be it fresh or lateral hire, have also seen a consistent double-digit growth in the past six-seven years and we see this trend continuing. The other factor that is leading to this transition of being a middle-income country is the demand for emerging skill sets and how it is effectively commanding a higher premium. Consequently, we are witnessing a growth in average salary. All these factors are significantly contributing to higher disposable incomes,” said Tripathi.
An economically evolved consumer would only bolster the growth of personal care products. FMCG players are eyeing a share of the rising disposable incomes of households by offering products with exotic ingredients like aloe vera. Fabric softeners, hair serums and premium brands of makeup and skin creams are some of segments that could see a growth boom in the coming years. The transformation is aiding the trend of premiumisation and convenience, said Marico MD & CEO Saugata Gupta. Modern retail and e-commerce, he added, have a big role to play here. The shift in demographics indicates that niche players would operate largely in the top and bottom end of the pyramid, while organised players would target mainly the mid-segment.