How India is set to become a big player in global consumption

India currently accounts for 3.3 percent of the world’s total consumption of $40 trillion, up from 2.5 percent in the early 1980s, according to a recent report by Citi. It also accounts for 17 percent of the world’s population.

In contrast, the US accounts for 23 percent of global GDP and 27.5 percent of world consumption. China accounts for 5.7 percent of world consumption and 9.3 percent of global GDP.

With its growing working population and favorable age demographics, Citi says India has the potential to significantly increase its share further.

Here’s why.

Fact 1:

Consumption accounts for 68 percent of the gross domestic product in India. Over the past decade, a mix of factors (favourable demographics, rising rural incomes and low penetration levels) has led to steady growth in consumption, which has climbed 5-7 percent each year, noted Citi.

With rising personal disposable incomes coupled with still-untapped rural sector demand, there will be continued support for consumption growth. Schemes like NREGA have helped rural consumption.

Fact 2:

Ordinary consumers are driving the India consumption growth story. Private consumption accounts for as much as 55 percent of total consumption. While the share of government has remained largely constant, schemes such as NREGA have helped support rural consumption, Citi said.

Fact 3:

India also has favourable demographics. The age distribution of population indicates the working age population will likely increase from 60 percent of total population to more than 68 percent by 2026. Indeed, India will soon become the centre of the world’s labour force, according to some experts.That will lead to increasing incomes, which, in turn, should boost consumption even further.

All charts provided by Citi