Considering the lament in the past over the inability to accurately estimate the Indian middle class — households with significant discretionary spending capacity — the sheer range of firms now venturing into the country is indicative not of the potential down the line, but of the market now.
This spans an entire gamut of sectors — from Galeries Lafayette to Foot Locker, from Laduree to Pauls — goods and services that are typically consumed by the relatively well-off in higher-income societies.
So, how big is the market? India’s per capita income is just under Rs 2 lakh or around $2,400. But this statistic conceals more than it illuminates. Delhi’s per capita income, for instance, is estimated at Rs 4.4 lakh ($5,475), Gautam Buddha Nagar at Rs 5.41 lakh ($7,261), Mumbai city and suburban at Rs 3.4 lakh ($4,390), Bengaluru urban at Rs 6.2 lakh ($8,006), Dakshina Kannada at Rs 4.43 lakh ($5,721), Hyderabad at Rs 3.5 lakh ($4,715) and Rangareddy at Rs 6.69 lakh ($8,980). There are also others like Gurugram, Ahmedabad, Chennai and Kolkata. (Years for the income estimates vary from 2020-21 to 2022-23).
As incomes of countries in the upper middle-income group range from $4,256-$13,205 as per the World Bank, most of these cities are already in that category. And though their distributions are skewed, given the size of their population, they have considerable heft. The overall size of the market in these cities could well rival other geographies — the Philippines has a per capita income of $3,499, Vietnam $4,164.
Arriving at precise estimates of households with sizeable discretionary spending capacity has always been challenging. Surveys, government and private, tend to underestimate household income and expenditure. The adjustments made to arrive at seemingly more accurate estimates often rest on shaky foundations. However, there are other indicators.
Consider the income tax data. For the assessment year 2018-19, around 1.5 crore individuals had gross total incomes of Rs 5-10 lakh ($7,100-$14,203, at the exchange rates). Another 52 lakh had incomes between Rs 10-50 lakh ($14,203- $71,013), while three lakh had an income of more than Rs 50 lakh (above $71,013). Five years later, in the filings for the ongoing assessment year 2023-24, the number of individuals in these categories is likely to be significantly more — they had doubled between 2014-15 and 2018-19.
However, these numbers, both filers and disclosed incomes, are gross underestimates, considering the under-reporting of incomes by certain categories of professionals and businessmen and the large number of non-filers. But, even then they rival other markets — Croatia, with a population of 38.5 lakh, has an income of $18,413, while Lithuania has a population of 28.3 lakh and an income of $24,827.
Another indicator is car sales. Buying a car is a clear indication of household discretionary spending capacity. As per NFHS 2019-21, 7.5 per cent of households own a car. That roughly translates to 8 per cent of the population having some spending capacity. But, while sales of entry-level cars have slowed down, suggesting low upward mobility, there are also indications of growing spending ability in other cohorts. In 2021-22, 7.78 lakh cars sold were priced above Rs 10 lakh (more than $12,000) as per CRISIL Market Intelligence and Analytics. In 2022-23, that rose to 10.36 lakh. And this is when the tax incidence ranges from 30 to 50 per cent.
For the spending capacity of the more affluent, there are more granular pointers. As per JLL, the houses sold in the Rs 1.5 crore plus category now account for roughly a fifth of all sales in the top seven cities. As per CBRE, projects with a quoted value of Rs 2 crore and above (more than $2,50,000) have increased by twice in comparison to pre-pandemic levels.
Similarly, sales of high-end luxury cars (Mercedes, BMW, Jaguar, Porsche, Lamborghini, Bentley and Rolls Royce) rose to 27,910 in 2022-23, up from 22,166 the year before as per data from FADA. Add the others and sales surpass 35,000. The luxury watch market (Rs 1 lakh and above) is also seeing strong numbers. In 2019-20, the size of the market was estimated at Rs 3,240 crore ($450 million at the exchange rates). By the end of next year, it is likely to touch Rs 5,940 crore ($740 million) as per Ethos’s annual report. In the case of the art market, an even more rarified segment, sale of 3,833 artworks fetched Rs 1,145 crore ($144 million) in 2022-23 as per Indian Art Investor’s art market report.
However, across the north, central and eastern parts of the country, only a handful of cities have such consumption heft. Most of them are located in western and southern India. It is perhaps no coincidence that among the top 20 exporting districts in the country, only two are from north, central and eastern India — Gautam Buddha Nagar and Gurugram. This only indicates that the centre of economic gravity on both the production and consumption sides is firmly located in western and southern India.
Though their share in the overall population is minuscule, the absolute number of these households is nothing to scoff at. So even as vast sections of the labour force face near stagnant real wages, millions more seek work under MGNREGA compared to pre-pandemic levels, and, the country’s political and financial capitals, its millennium city and Silicon Valley are submerged during the rainy seasons, for these households, well ensconced in their gated islands, and they are just that, it’s the roaring Twenties. So while India may not be the next China by the end of this decade, even if it only manages to chug along, averaging 6 per cent, it could well eclipse some major markets.
ishan.bakshi@expressindia.com
In 2021-22, 7.78 lakh cars sold were priced above Rs 10 lakh (more than $12,000) as per CRISIL Market Intelligence and Analytics. In 2022-23, that rose to 10.36 lakh. And this is when the tax incidence ranges from 30 to 50 per cent. (Express File Photo) 
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