What's behind the spending habits of Indians?

India is a rapidly growing economy with an emerging middle class. There are many factors behind the spending habits of Indians, including income, population growth, and changes in consumer preferences. To understand better, let’s take a closer look at the underlying factors behind the spending habits of Indians. 

Rise in Affluence 

India has witnessed a rise in affluence due to growing income levels & job opportunities across different sectors of India. This has led to an increase in the average disposable income for Indian households. It is forecasted to grow by an average of 9.5% p.a., from Rs 494,500 in 2022 to Rs 697,200 in 2026. Inflation is forecast to average 4.3% annually for the same period. This means Indian consumers will see their disposable incomes increase in real terms, estimated at an average of ~5.2% p.a. (Source - Fitch Solutions)

More flow of credit 

With the emergence of new-age credit providers, access to credit for Indian consumers has significantly increased in the past few years. According to the RBI, personal loans expanded by 20.2% (Y-o-Y) in October 2022 compared to 12.6% in 2021, largely driven by vehicle loans & housing. 

Ease of Shopping 

Indians now have access to a wide range of products and services at their fingertips, which has enhanced their spending habits. Companies like Amazon, Flipkart, Myntra, Nykaa, etc have created convenient online shopping experiences with free delivery options and same-day delivery for customers who pay an annual subscription fee.   

Urbanization 

Over the past 2 decades, there has been a steady influx of people into cities like Bangalore, Delhi, Mumbai, etc., resulting in higher demand for products ranging from basic necessities like food and clothing to luxury items such as electronics or jewelry. This trend has resulted in higher consumer spending overall due to increased purchasing power among city dwellers.  

Undoubtedly, rising disposable incomes combined with changing preferences brought about by technological advancement have enabled consumers to spend more than ever before on items like travel and luxury goods that were previously considered out of their reach. All in all, Indian consumer spending is expected to continue its robust growth trajectory into 2023—a trend that looks set to remain unchanged for years to come!

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