India’s real GDP is expected to grow at more than 6% every year between 2023 and 2028, according to Goldman Sachs Research. In tandem, the wealth of affluent Indians is rapidly growing as well. By 2027, according to a report titled “The rise of ‘Affluent India’” by Goldman Sachs Research, this cohort of affluent consumers will increase from around 60 million in 2023 to 100 million people by 2027.
We spoke to Arnab Mitra, an analyst who leads research coverage of Indian consumer brands, about his team’s research, their calculations and forecasts, and the characteristics of affluent Indians.
What kind of data did you use to triangulate your definition of “affluent” Indians?
We looked at the number of people who take a flight at least once a year; the number of people who order from food delivery services at least once a month; the number of people who file income taxes on sums of more than 1 million rupees ($12,046); the number of people who have credit cards and postpaid mobile connections. Whichever way we looked, it seemed that the unique number of people who use discretionary products and services is somewhere in the region of 50 or 60 million. Then we looked at the income pyramid, which tells us what the top 60 million people earn. It seems to be around an annual $10,000 per person.
And how has that changed over time?
From 2019 to 2023, the cohort has shown a compounded annual growth rate of about 12-13%. That is corroborated by the sectors I mentioned. So the number of credit cards has grown by about 14-15%, for example. The tax filings we looked at, for more than 1 million rupees — they were growing at about 19%.
One thing we see in your data is how the volume of household financial assets invested in shares has grown conspicuously since 2016. How else do we see the growth of this cohort in the dynamics of the Indian stock markets?
It’s quite clear that companies that address this cohort exclusively, or largely, have been growing much faster than companies that address broad-based consumption. We compared companies in the same sector that cater to upper-income consumers versus a broader group. So in cars, for instance, we compared SUVs to other kinds of cars. Or we compared premium liquor and spirits brands to more mass-market brands. We also looked at hospital or watch companies that exclusively target affluent consumers. All these stocks—they’ve done significantly better in terms of returns.
How do gold and stock holdings contribute to the wealth of these affluent Indians?
We don’t always have clear data on gold ownership, although there is one government survey showing that 90% of gold is owned by people in the top 10% of India’s earners. With shares — before the pandemic, there were 41 million Indians with online stock trading accounts, and these people would have made a lot of money since then. Again, this syncs with the 60 million figure we postulate for affluent Indians. Now, of course, the number of Indians with such trading accounts has risen to more than 100 million.
Can we say anything about the non-affluent Indians — the broader population, and how they’ve fared in this same period?
Essentially, the drivers of consumption are different. Inflation impacts the non-affluent cohort more, because they have fewer savings. Even before the pandemic, rural growth in fast-moving consumer goods had slowed down. That possibly has to do with the fact that agricultural output prices have not increased much over the last five years. And there have been disruptions such as demonetization and the introduction of a new, nationwide goods and services tax, followed by the pandemic, which affected a higher number of small businesses and people in low-income segments.
How will this cohort of affluent Indians grow?
After having seen these growth numbers of 12-13%, we investigated whether any of the factors driving upper-income growth are changing. The wealth effect is, if anything, strengthening, because it kicks in with a little bit of a lag — when your stock holdings rise in value the first year, you don’t feel as good as when they rise for the third consecutive year. That’s when you start spending because you feel it’s a little more permanent. So we extrapolated the growth rate between 2019 and 2023, which is around 12-13%, into the next four years, expecting a cohort of 100 million by 2027. And if the wealth effect is strong, it could be even more.
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