Consumer spending in India is likely to grow three to four times annually in the next five years as the per-capita income is expected to rise to $4,000, according to Lalit Agarwal, chairperson of V-Mart Retail Ltd.
As a vast majority of Indian customers have a monthly income in the range of Rs 20,000 to Rs 40,000 per month. It restricts the retail purchases that people make, the managing director said during a conversation with NDTV Profit on Friday.
“There’s a large potential in India and right now, we are hovering around $2,700 per-capita income,” the CMD said. “We are going to see this ticking up to $4,000 in the next five years and that is where the trigger of consumption will begin and when people have a little extra money, they will buy more than three or four times annually.”
Agarwal identified Gen Z and youth as “core to the Indian market” and the “largest consumer segment evolving” in the country. “This demography will drive what consumption or consumer products look like.”
This demographic focus is particularly relevant in northern and central India, where the youth population continues to rise. In contrast, he described southern India as a market that is “getting aged up”. However, it has a higher per-capita income and a “higher potential investment”.
He said that small, local shops and markets currently serve two-thirds of the country. Thus, a significant growth opportunity lies in transitioning customers from the unorganised sector to the organised retail framework.
“A huge opportunity for the organised retailer and that is where you can bring in more consumers to your organised frame and that is what is happening with all of these retailers,” he said.
Due to the currently limited per-capita income of the country, “the customer buys only two or three times a year. And when they buy, they make their decision like an investment decision”, the CMD said.
This underlines the importance of trust and credibility for a retailer. “It all matters about the credibility of the retailer and what they are offering. That creates the ratings for the customer,” the top executive noted.
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