India’s affluent class is on track to reach 100 million in the next three years, as reported by Goldman Sachs. This surge in wealth among high-earning Indians has led to an increased demand for premium goods and services within the country. The growth of the affluent class is expected to positively influence sectors such as leisure, jewelry, out-of-home food, healthcare, and premium brands. However, this rise in wealth has also brought attention to the income disparity and the accessibility of basic amenities in the Indian economy.
1. Who Comprises ‘Affluent India’?
The top 4 percent of the working-age population in India, with an annual per capita income exceeding $10,000, is classified as ‘Affluent India’ by Goldman Sachs. This group currently amounts to about 44 million people and is projected to reach around 60 million, considering the total population of 1.42 billion. The ‘Affluent India’ demographic signifies the widespread adoption of discretionary products and services in the country.
2. The Strong Wealth Effect as a Factor
The increase in wealth among high-earning Indians can be attributed to various factors. The market capitalization of India has surged by more than 80 percent in the last three years, driven by increased retail participation. The price of gold has also witnessed a substantial 65 percent rise from 2020 to 2023. Additionally, property prices in India have experienced a notable increase of approximately 30 percent from FY19-23. These factors have contributed to the growing wealth and purchasing power of the affluent class.
3. India’s Ascension to the Third-Largest Economy by 2027
The International Monetary Fund predicts that India, currently the world’s fifth-largest economy, is poised to become the third-largest by 2027. This growth is driven by the increasing spending power of the middle class, benefiting companies offering premium brands in various sectors such as leisure, jewelry, out-of-home food, and healthcare.
4. What Fueled the Gains?
The notable value growth in India’s wealth can be attributed to three main asset classes: gold, equities, and property. The market capitalization of the Indian stock market has surged by 80 percent from January 2020 to January 2024. The number of retail investors and the flow of household savings into shares have significantly increased. The price of gold has also risen by approximately 65 percent, contributing to the rising wealth effect. Property prices have shown a noticeable increase as well.
5. Spending Power Disparity Persists
Despite the overall economic growth in India, there remains a divide in spending power between the top earners and the middle class. While certain sectors are witnessing a surge in consumption, challenges related to income inequality and access to basic amenities still exist in the evolving Indian economy.
FAQs:
1. What is the definition of ‘Affluent India’?
Goldman Sachs classifies the top 4 percent of the working-age population in India with an annual per capita income exceeding $10,000 as ‘Affluent India’.
2. Which sectors are expected to benefit from the rise of the affluent class?
Sectors such as leisure, jewelry, out-of-home food, healthcare, and premium brands are expected to benefit from the increased consumption by the affluent class in India.
3. What factors have contributed to the rise in wealth among high-earning Indians?
Factors such as robust economic growth, a stable monetary policy, increased retail participation in the stock market, and the rise in gold prices have contributed to the increase in wealth among high-earning Indians.
India’s growing middle class and increasing spending power are benefiting companies offering premium brands in various sectors, leading to increased sales of premium goods.
5. What challenges does the Indian economy still face despite its overall growth?
Income inequality and disparities in access to basic amenities persist in the Indian economy, highlighting the need for inclusive growth and development.