Private Consumption, A $6 Trillion Opportunity
10, Jan 2019
Prelims level : Economy-Report Mains level : Indian Economy and issues relating to planning, mobilization, of Resources, Growth, development and employment.
- Domestic private consumption that accounts for a major portion of India’s gross domestic product (GDP) is expected to develop into a $6 trillion growth opportunity that would make India the world’s third-largest economy by 2030, says a latest study by the World Economic Forum (WEF).
- Currently it is at $1.5 trillion. The potential, however, offers both challenges and opportunities as India would have to address critical societal issues, including skill development and employment of the future workforce, socio-economic inclusion of rural India and creating a healthy and sustainable future for its citizens
- With an annual GDP growth rate of 7.5%, India is currently the world’s sixth-largest economy.
- By 2030, domestic private consumption, which accounts for 60% of the country’s GDP, is expected to develop into a $6 trillion growth opportunity,” said a report titled Future of Consumption in Fast-Growth Consumer Market – India by the WEF.
- If realized, this would make India’s consumer market, the third-largest in the world, behind the U.S. and China. According to the WEF, the future of consumption in India in 2030 is anchored in rising incomes and a broad-based pattern of growth and benefit sharing.
- It believes that the growth of the middle class would lift nearly 25 million households out of poverty and further, India would have 700 million millennial and Gen Z consumers (Most of Generation Z have used the Internet since a young age and are comfortable with technology and social media), who have grown up in a more open and confident country.
- The study, however, added that the potential would only materialize if business and policy-makers pursue an inclusive approach towards the economic and consumption growth.
Study identified three critical societal challenges that need to be addressed:
- According to the study, with nearly 10-12 million working-age people expected to emerge in India over the next decade, the country faces a huge challenge in providing the workforce with the right skills. More than one-half of Indian workers will require reskilling by 2022 to meet the talent demands of the future
- Second, India will have to manage socio-economic inclusion of rural India as, by 2030, 40% of Indians will be urban residents.
- Physical connectivity, digital connectivity and financial inclusion income is constraining the spending and well-being of rural dwellers, and these ‘access-barriers’ need to be addressed to ensure social and economic inclusion in India over the next decade.
- Finally, business and policy-makers will have to take the initiative on improving health and liveability for India’s citizens by providing them with access to affordable healthcare, promoting sustainable development, and seeking solutions to urban congestion.