India’s consumption story is deepening 

India’s consumption story is deepening, and it is already visible in the data. 

Viewed over a long horizon, multiple indicators point to an economy in which the consuming base has expanded in breadth, capitalisation, and formal integration relative to a decade ago. 

At the macro level, private final consumption expenditure has remained a stable anchor of growth. Excluding the pandemic distortion, consumption has consistently remained in the 57–58% range as a share of GDP, a ratio that places India between consumption-heavy economies such as the US and investment-led models such as China.   

Private consumption has remained stable as a share of GDP

Conventional theory suggests that as incomes rise, household expenditure gradually shifts away from staples toward discretionary categories. In India, however, consumption patterns have remained broadly stable over the past decade. Food, housing, and transport continue to dominate household budgets. Yet within this apparent stability, incremental consumption has tilted toward higher-value categories. 

Spending on education and health has risen steadily as a share of total consumption—from roughly 3.5% each in FY2012 to around 4.5% and 5.4%, respectively, by FY2024. These changes are modest in percentage terms but large in absolute rupee terms, underscoring an important distinction: stable category shares do not imply stagnant demand when the consumption base itself is expanding. 

Household balance sheets provide a second lens. Data from Thurro’s platform, based on RBI’s disclosures, show that aggregate household balance sheets have strengthened since the pandemic, alongside a gradual rise in leverage. Net asset positions have improved for a large segment of households, even as borrowing has increased. This strengthening is visible not only in national accounts data but also in micro indicators, including higher average bank balances, rising financial-market participation, and broader ownership of market-linked instruments. Leverage has increased—particularly through unsecured credit—but from a position of stronger asset backing than a decade ago.

Household net financial assets have improved, even as liabilities have risen 

Income growth and formalisation form the third pillar. Formal payroll employment, proxied by provident fund participation, has expanded steadily since 2019, alongside positive real wage growth within the organised corporate sector. The tax base has widened materially, with the number of individual taxpayers doubling over the past decade and reported taxable income rising faster than nominal GDP. Crucially, this expansion has been driven by an increase in the number of higher-income filers rather than by outsized income gains within slabs, pointing to a broadening consumption base rather than a narrow elite effect. 

Regional dynamics add another nuance to India’s consumption story. High-frequency indicators across consumer goods, mobility, credit, and financial assets point to a multi-speed consumption landscape, where metros, Tier-2/3 cities, and rural areas contribute through distinct channels. 

Metros continue to dominate in absolute terms, particularly in high-ticket discretionary categories, while Tier-2, Tier-3, and rural regions are driving incremental volume growth. Rural consumption remainssensitive to monsoon outcomes and food inflation, yet recent data show stronger volume growth in rural FMCG, rising two-wheeler registrations outside large cities, and expanding access to formal credit from a low base. These patterns suggest periodic constraints rather than structural deterioration. 

The clearest signal of aspiration translating into spending is premiumisation. Vehicle data, for example, show a gradual shift from two-wheelers to four-wheelers and rising average prices within passenger vehicles. Air travel volumes have exceeded pre-pandemic levels, and organised retail chains—particularly in jewellery and discretionary segments—have expanded store networks well beyond major metros. These are supply-side decisions that reflect confidence in sustained demand from higher-income and formalised cohorts. 

The two-wheeler to four-wheeler ratio indicates gradual premiumisation in vehicles 

There are some risks. Unsecured credit growth, rural income volatility, and inflation shocks can all interrupt consumption momentum. Employment quality, not just employment quantity, will be critical over the next decade.  

Yet taken together, the evidence points to an economy where consumption is not merely growing, but deepening—supported by stronger balance sheets, wider formalisation, and a gradual shift toward higher-value spending.  

The central question is not whether consumption will matter for India’s growth, but which segments will drive it, and how resilient those drivers will be when conditions tighten. 

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