New Delhi: India might be home to 1.4 billion people, but a billion of those people don’t have money to spend, reports the BBC.
Based on a report by venture capital firm Blume Ventures, the BBC reports that India’s consuming class—the market for start-ups and business owners—is only around 130-140 million people. Another 300 million people are “emerging” or “aspirant” consumers, who are reluctant spenders.
“What is more, the consuming class in Asia’s third largest economy is not ‘widening’ as much as it is ‘deepening’, according to the report. That basically means India’s wealthy population is not really growing in numbers, even though those who are already rich are getting even wealthier,” the BBC reports. “All of this is shaping the country’s consumer market in distinct ways, particularly accelerating the trend of ‘premiumisation’ where brands drive growth by doubling down on expensive, upgraded products catering to the wealthy, rather than focusing on mass-market offerings.”
Essentially: the rich have gotten richer, while the poor have lost purchasing power.
This slump in consumption is coupled with a drop in financial savings and rising debt. India’s middle class, which for so long has driven consumer demand, is shrinking with wages pretty much stagnating.
The Economist, on the other hand, writes that India has undermined a popular myth about development: that the “eradication of poverty” doesn’t require a manufacturing miracle.
India has all but eliminated the most extreme forms of poverty, the article says. “More than 40% of India’s workers are still employed in agriculture. Perhaps people can leave poverty without leaving the land,” the article says.
This article quotes from another report—this time by economists at the University of California, San Diego, which examines the paths out of poverty taken by five big emerging economies: China, Indonesia, Mexico, South Africa, and India.
“The economists find that people become better off as they get older, since they acquire, say, land and experience. Their paper also confirms that today’s young are better off than yesterday’s young, perhaps because they have benefited from better education and nutrition. The researchers then show that these two trends tend to offset each other, so that in any given year, young and old adults have similar rates of poverty. Each generation has a better life than their parents did at the same age. But they do not have a better life than their parents do in the same year,” the article says.
This is a theme that The Economist explores in another article about how India is rapidly ageing. In a story on how Indian life expectancy has risen, The Economist says that India’s progress has been dramatic, and this achievement is all the more impressive given its huge and diverse population.
“Public-health success brings opportunities. Half of India’s population of 1.4bn is under the age of 29. This big and expanding workforce boosts economic growth,” the story says. “Yet success has brought a new challenge, too: for the first time in its history, India has a large and growing cohort of old people. Around 150m people are aged 60 or above. By 2050 the share will double to nearly 21%, or about 350m—more people than live in America today.”
India’s therefore growing old before it gets rich—complicating the path to becoming a developed country. The Economist is particularly concerned about how India’s old may face a harsh and lonely retirement, with fewer working-age adults to support the elderly and very low savings. The problem is worse for women, especially with widowhood still a social stigma in the most conservative parts of India.
“In India, as elsewhere, the long-term solution will require faster economic growth, more formal jobs and later retirement. But creative thinking is needed in the short term as well,” The Economist writes. One model is an elder daycare, where elderly people can spend time together with people from similar age groups rather than recede into the background of their children’s homes.
“India has done an impressive job of extending life spans. Now it must try to ensure those lives are well lived,” The Economist writes, echoing the same concerns as the BBC.
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