India to overtake Germany as the third largest consumer market by 2026: UBS

With the rise in people in the affluent category, India is on track to become the third largest consumer market in 2026, overtaking even Germany and Japan, as per a report by UBS.

The report indicates, the affluent category housed around 4 per cent of India’s population or 40 million people as of 2023. This number is likely to more than double in the next 5 years, adds the report. Around 88 million people will earn $10,000 in annual income by 2028, the report highlights.

Growth in consumption is likely to remain muted at 5 per cent in the current and next fiscal, notes the investment bank. While demand in the urban mass-market demand is likely to show modest growth over softening of corporate wage growth, moderating personal loan growth and the lagged impact of monetary tightening, the premium/ affluent segment will continue to do well, adds the report.

In FY25, inflation is likely to ease to 4.5 per cent from the average of 5.4 per cent in the previous fiscal, estimates Reserve Bank of India. The resilient domestic market will favor India’s economy. However, the country needs quality jobs to sustain consumption growth, the RBI report points out.

According to UBS, the consumption dichotomy in India can be explained by the divergence in incomes post-pandemic, improved access to consumer credit and changing consumer preferences.