McKinsey Global Institute (MGI) in its latest study titled “The ‘Bird of Gold’: The rise of India’s consumer market” claims that India will be among the world’s top 5 consumer markets by 2025, if it sustains and accelerates economic growth.

The study states- “The combination of rapidly rising household incomes and a robustly growing population will lead to a striking increase in overall consumer spending.”

Playing a key role is its burgeoning middle class, which will have grown almost 12 times, to touch 583 million, by then. The number of wealthy citizens alone will amount to a whopping 23 million. The poorer segments are also likely to improve considerably, their numbers dropping from a 54 % of the population in 2005 to 22% by 2025.

Predicated on India’s real GDP growth ranging between 6 % and 9 % a year over the next two decades, the study claims that the aggregate consumption in India will grow fourfold in real terms, from Rs. 17 trillion at present to Rs. 70 trillion

The study assumes real compound annual growth of 7.3 % in the 2005–2025 period, a marked acceleration from the 6 % growth of the previous two decades. This is based on the substantial scope for continued productivity increases in Indian businesses, the growing openness and competitiveness of the Indian economy, and favourable demographic trends.

This growth path will also involve tripling of the current income levels. With the nation gradually accommodating improved lifestyles, the study predicts that expenditure on foods, beverage and tobacco (FB&T) will drop as a proportion to overall expenditure in the next couple of decades from 42 % to 25 %. Annually spending on communications on the other hand will escalate by over 13% from the current 2 %.

However in spite of the impressive figures India’s market size will continue to be tied to its large population. Per capita spending though tripling from current levels is likely to remain modest at Rs. 48,632 in 2025.