Even amid global uncertainty, the Indian economy continues to stand strong. One of the biggest and most reliable pillars behind this performance is domestic consumption. India’s large and young population, rising incomes, rapid urbanisation, and easy access to credit are all driving this growth in consumption.
The rise in India’s consumption is not just a short-term trend but a long-term structural shift. It has the potential to keep India among the world’s fastest-growing major economies for decades.
Let us understand how India’s consumption story has made it one of the fastest-growing economies in the world, and which sectors are benefiting from this trend.
What’s Happening?
The biggest engine driving India’s economic growth is its domestic (private) consumption, which makes up nearly 60% of the GDP. This is why domestic demand continues to shield the Indian economy even during times of global instability.
According to the IMF, India is expected to grow at 6.6% in 2026, while China’s growth is likely to be around 4.8%. In contrast, global economic growth may slow from 3.3% in 2024 to just 3.1% in 2026. This difference shows that India’s strength comes from its strong internal demand.
One major reason behind this momentum is the steady rise in Indian consumption, which is no longer limited to basic needs but has expanded to include premium and discretionary products.
Consumption Story Enters a New Phase
India’s per capita income crossed $2,600 in FY25 and is expected to reach $5,000 by FY30. During the same period, the share of non-essential spending has increased from 36% to 43%, reflecting rising premiumisation and a growing affluent middle class. Infrastructure investments, growth in equity and real estate markets, and the wealth effect have increased household spending power. Urbanisation and the rise of nuclear families have reshaped sectors like housing, transportation, education, and lifestyle.
Currently, consumption trends are moving beyond FMCG and automobiles toward personal care, electronics, health, and fitness. Consumers are spending more on experiences such as travel, dining, and leisure rather than only on goods, transforming the overall consumption landscape in India.
Premiumisation and Shifting Priorities
According to a recent report by Franklin Templeton, premiumisation is adding a new chapter to India’s consumption story. In FY24, premium FMCG products made up 27% of total sales but contributed 42% to the sector’s overall growth. Premium detergents recorded a 26% CAGR, premium hair care grew by 16%, and green tea saw 25% annual growth, all much faster than their mass variants. Brands like HUL, Dabur, Marico, and Britannia have successfully captured these trends.
Similarly, in appliances and electronics, the share of premium and aspirational products was around 50% in FY24 and is expected to rise to 60% by 2029. Air conditioner penetration in India is still only 8% compared to the global average of 42%, indicating strong potential for market expansion. Even in rural and smaller towns, spending has increased 2.6 times compared to 2012.
What’s in it for investors?
India’s consumption theme is not a short-term trend but a structural investment opportunity, driven by long-term factors such as rising incomes, urbanisation, and social transformation. Government and RBI policies like tax cuts, GST reforms, rate reductions, and pay commission revisions could further accelerate this growth in the coming years.
It gives investors exposure to multiple sectors, including FMCG, automobiles, healthcare, retail, travel, and financial services. Thematic funds offer an easy way to invest in this broad consumption story in a diversified manner. However, short-term fluctuations are possible, so investors should consider their risk tolerance and long-term goals before investing in this theme.
What’s Next?
India’s new phase of consumption is closely linked to the rise in domestic wealth and growing financial confidence. According to Franklin Templeton, domestic savings in FY24 stood at Rs 54 lakh crore and are expected to reach Rs 82 lakh crore by 2030 and Rs 132 lakh crore by 2035.
While the top 20% of households still account for the largest share of savings, the lower-middle class is catching up fast. Savings in this segment are projected to triple to Rs 26 lakh crore by 2035. Savings have also become more diversified over time. The share of mutual funds has risen from 2% a decade ago to 5% today and is expected to reach 8% in the next ten years. In September 2025, monthly SIP inflows stood at Rs 29,361 crore, showing that Indians are now saving not only more but also more consistently.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
