India's Consumption Gap: A Billion Left Behind

India, often seen as a vast consumer market, faces a stark reality—one billion people lack discretionary spending power, according to a report by Blume Ventures. 
 
While the country has a population of 1.4 billion, the actual consuming class is just 130-140 million, comparable to Mexico. 
 
Another 300 million are classified as emerging consumers, but the majority struggle financially, limiting broad-based market expansion.
  
Instead of widening its consumer base, India’s economy is shifting toward premiumisation, where businesses increasingly cater to the wealthy. 

 
Luxury housing, high-end smartphones, and premium brands are thriving, while affordable goods see declining demand. 
 
The affordable housing segment, for example, has shrunk from 40% to just 18% of the real estate market in five years.
 
This divide follows a K-shaped economic recovery, where the wealthy have gained purchasing power, while lower-income groups face economic stagnation. 
 
Since 1990, the top 10% of Indians increased their income share from 34% to 58%, while the bottom 50% saw their share drop from 22.2% to 15%. 
 
Rising debt and falling household savings, now at a 50-year low, further widen the gap.
 
Though agricultural growth and a $12 billion tax relief package may boost demand temporarily, economists estimate only a 0.5% GDP uplift, insufficient to reverse deep-rooted structural issues. 
 
The middle class, a key driver of consumption, has seen stagnant incomes over the past decade, with inflation further eroding their purchasing power and savings.
 
Adding to the crisis, AI and automation are displacing jobs, especially in clerical and manufacturing roles. The government’s economic survey warns that technological disruption could further weaken consumer demand by reducing employment opportunities.
 
India’s economy is increasingly reliant on high-income consumers, while mass-market demand weakens. 
 
Without policies to revive spending power among lower-income groups, long-term growth could face serious challenges. 

Businesses and policymakers must address income inequality and declining consumption to ensure inclusive economic development.