India, often touted as a land of vast economic potential, faces a stark contradiction. Despite its 1.4 billion population size, only a fraction truly participates in discretionary spending. The widely held perception of India as a massive consumer market does not align with the reality that nearly a billion people lack the financial means to buy anything beyond basic necessities. This structural imbalance, where consumption is increasingly concentrated among the wealthiest, is reshaping the country’s economic future.

At the core of this issue is a fundamental divide: India’s true consuming class ~ those with the ability to spend freely on goods and services ~ is estimated to be just around 130-140 million, roughly the size of Mexico’s population. Another 250 million are classified as “emerging consumers,” but their spending is cautious and often reliant on easy credit, which is now tightening due to regulatory crackdowns. Meanwhile, the remaining billion people are effectively excluded from discretionary consumption. This economic reality has forced businesses to shift strategies. Instead of broadening their market reach, companies are focusing on “premiumisation” ~ targeting the affluent with high-end products and services.

Advertisement

Luxury housing is booming, while affordable housing has shrunk from 40 per cent of the market five years ago to just 18 per cent today. The same trend is evident in consumer goods, automobiles, and even entertainment, where premium brands and experiences are thriving while budget alternatives struggle. This is not just a post-pandemic trend; it is the continuation of a deeper structural shift. India’s economic recovery has been “K-shaped,” benefiting the wealthy while leaving the rest behind. Over the past three decades, inequality has widened significantly, with the top 10 per cent now controlling nearly 58 per cent of national income, while the bottom half has seen its share shrink. The middle class, which has traditionally been the engine of consumer demand, is being squeezed by stagnant wages, job losses, and declining savings. However, an economy driven by the spending of the narrow elite is not a sustainable model for long-term growth.

In a situation where only a fraction of the population can afford discretionary purchases, businesses catering to the masses struggle, leading to job losses and further economic distress. A thriving consumer economy requires bro – ad-based prosperity, where wage growth, job security, and financial stability enable millions ~ not just a privileged few ~ to participate meaningfully. In the short term, a record harvest and tax incentives may provide a temporary boost to spending, but these are Band-Aid solutions. Without systemic reforms to create stable jobs, boost incomes, and increase financial security, India’s consumer base will remain far smaller than its population suggests.

Policymakers must recognise that true economic strength lies not in luxury sales or high-end services, but in the ability of the wider population to engage in sustained, meaningful consumption. Otherwise, the vision of India as a billion-strong consumer powerhouse will remain an illusion.