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Exploring India's Consumption Patterns and Their Impact on Economic Growth

A detailed analysis of India's consumption patterns across different segments and their contribution to the GDP, based on the Blume Indus Valley Annual Report 2024.

Dheeraj Kumar

India's economy is significantly influenced by consumer spending, with a large portion of its Gross Domestic Product (GDP) being driven by the purchase of essential items, particularly food. The Blume Indus Valley Annual Report 2024 highlights the importance of consumption in India's economic landscape, dividing the country into three distinct consumer segments.

The first segment, known as India 1, consists of 30 million households or about 120 million people. This group, with a per capita income of $15,000, is the primary consumer base for many start-ups and is considered the starting point for most new businesses before they expand their reach. India 1 is crucial for driving the economy and sustaining the trend towards premium products and services.

India 2 represents the emerging aspirational class, comprising around 70 million households or 300 million people, with a per capita income of $3,000. This segment is characterized by significant consumption habits, though they tend to be more cautious with their spending. They are the target audience for sectors like OTT/media, gaming, edtech, and lending, with payment innovations like UPI and AutoPay enabling their small-ticket purchases.

The third segment, India 3, includes 205 million households or 1 billion people, with a per capita income of approximately $1,000. This group's financial constraints limit their ability to afford discretionary goods, making them less of a focus for start-ups.

Despite the dominance of essential spending, discretionary spending in India has seen a steady increase, growing from 21 percent of consumption in 1999-00 to 29 percent in 2022-23. However, the report notes that India still underconsumes in many categories due to the relatively small size of its consuming class. Over recent years, there has been a significant expansion in the number of households that can be classified as part of the consuming class, indicating a growing appetite for premium products among Indians.

Conclusion: The Indian market is diverse and segmented, with varying levels of income and consumption patterns. As the country continues to develop, the growth of its consuming class presents significant opportunities for businesses, especially start-ups looking to tap into the increasing demand for premium products and services. In this evolving landscape, tools like Probz.ai, an AI-powered platform for gathering qualitative and quantitative insights, can play a crucial role in understanding consumer behavior and guiding business strategies.

HR & Recruiting

Dheeraj Kumar

data specialist

Archit has been working in the field of data science since 2018. He has worked with various clients in the field of healthcare, education, and finance. He has worked with various clients in the field of healthcare, education, and finance. He has worked with various clients in the field of healthcare, education, and finance.

Member since Mar 15, 2021

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