100 million Indians poised for surge in affluence by 2027

In a report titled 'The Rise of Affluent India,' Goldman Sachs predicts that the number of affluent Indians, defined as those with an annual income exceeding US$10,000 (approximately Rs 8.3 lakh at current exchange rates), is set to soar from the current 60 million to a staggering 100 million by the year 2027. This projection hints at a significant paradigm shift in consumer behaviour and wealth creation, with far-reaching implications for various sectors, ranging from luxury goods and the stock market to automobiles and jewellery.

To comprehend the magnitude of this projection, consider that only 14 countries globally have populations exceeding 100 million. The exponential growth of this affluent class, constituting just about 4% of the current working population, is anticipated to have a profound impact on India's economic landscape. The report highlights a remarkable 12% compounded annual growth in this affluence class between 2019 and 2023, a stark contrast to the mere 1% increase in the overall population during the same period.

This surge in affluence has translated into a substantial increase in financial and physical assets, encompassing equities, gold, and property. Goldman Sachs points to a noteworthy 2.8 times increase in demat accounts, reaching 114 million in 2023, signalling a surge in stock ownership and mutual fund investments. The value of gold held by Indians has surged by an impressive 63%, reaching Us$1.8tn between 2019 and 2023.

Financial analysts suggest that the sharp increase in demand for premium products spans various industries, including fast-moving consumer goods (FMCG), footwear, fashion, passenger vehicles, and two-wheelers. Companies focusing on top-income consumption have experienced enhanced performance, with notable success observed in the jewellery, travel, premium retail, and healthcare sectors.

This affluence boom has not only impacted consumer behaviour but has also altered company product portfolios. As an example, Nestle has outpaced Hindustan Unilever, while HUL'S premium portfolio has exhibited faster growth than its overall revenue. Indicators such as credit card ownership have surged by 80% since FY19, and credit card spending has witnessed a remarkable 250% increase during the same period, serving as a proxy for consumption by the affluent class.

Crucially, Goldman Sachs analysts assert that this surge in top-end consumption is not a transient trend. Despite initial speculation that the divergence in consumption patterns was a result of COVID-19 restrictions, the report argues that the phenomenon persisted even after the full lifting of restrictions in early 2022. The sustained growth rates, even 24 months post-restriction, indicate that the boom in 'Affluent India' is rooted in basic economic shifts rather than pandemic-related factors.

While the report paints a promising picture of India's economic landscape, it does not shy away from highlighting potential risks. Changes in the government's tax policy, corrections in stock and gold prices, and increased competition from new market entrants pose challenges that could impact the trajectory of this affluence surge.

The prediction by Goldman Sachs paints a dynamic picture of India's evolving economic landscape. The profound impact on various sectors, coupled with sustained growth trends, positions 'Affluent India' as a force to be reckoned with in the global economic arena.