Download - 306245 Mckinsey the India Consumer Story
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McKinsey Global Institute
Tapping Into the Indian ConsumerMarket
28 June 2007
The India-Europe Investment Forum
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HOW WILL INDIAS CONSUMER MARKET EVOLVE IN THE FUTURE?
Indias economy has been growing rapidly
What impact has growth had on Indian incomesand how quickly will they grow in the future?
How is the distribution of income changing? Whenwill its middle class take off?
How is income growth effecting urban versus ruralareas?
How much of rising Indian incomes will be spentversus saved?
What will Indian consumers spend their newfoundwealth on?
What does this
mean for business
and investment
opportunities?
How should
companiescompete for the
new Indian
consumer?
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OUR PANEL
Prashant Desai Group Head, Investor Relations andNew Ventures (PE), Pantaloon Retail (India) Limited
Richard Fairgrieve Director of Global Emerging Markets,WestLB Mellon Asset Management
Dippankar S. Haldar Chief Executive Officer, WadhawanFood Retail (P) Limited
A.P. Parigi Managing Director and Chief ExecutiveOfficer, Entertainment Network (I) Limited
R. Subramanian Managing Director, Subhiksha TradingServices
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KEY FINDINGS FROM McKINSEY GLOBAL INSTITUTE RESEARCH
Indian incomes will triple over the next two decades,significantly reducing poverty
India will emerge as the worlds fifth largest consumereconomy
A large urban middle class will develop, but rural areas willbenefit too
Patterns of consumption will shift rapidly towardsdiscretionary spending
Income and consumption growth will create opportunitiesand challenges for business and government
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4Source: McKinsey Global Institute
HOUSEHOLD INCOME GROWTH WILL ACCELERATE ACROSS INDIA
Average household disposable income
thousand, Indian rupees, 2000
19852005
20052025
0
100
200
300
400
500
1985 1990 1995 2000 2005 2010 2015 2020 2025
Rural
Urban
5.8%
3.6%
All India
5.3%
4.6%
2.8%
3.6%
Actual Forecast
Compound annualgrowth rates
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5
Note: Figures are rounded to the nearest integer and may not add up to 100%.
Source: McKinsey Global Institute
93
80
54
35
22
18
41
43
36
6 000
0755
1985
02
928
1995
4 1
2015F
29
32
2025F
100%1,107
2005E
11 1
19
1,278 1,429Globals (>1,000)
Strivers (5001,000)
Seekers (200500)
Aspirers (90200)
Deprived (
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6
5 4 3
9 12 12
5
3 00
1
00
17
2005E
43
12
34
2015F
14
16
25
2
70
2025F
0 17
1985
110
1995
12
Globals (>1,000)
Strivers (5001,000)
Seekers (200500)
Aspirers (90200)
Deprived (
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INDIA WILL BECOME THE FIFTH LARGEST CONSUMER MARKET IN THEWORLD BY 2025
Aggregate private consumption, 20052025
billion, $, 2000
India Brazil India Italy India Germany
334 18,4292,082 584 13,540 1,064Per capita$, 2000
Source: Global Insight; UN Population Division; McKinsey Global Institute
370 388
746 783
1,5111,521
12 611 8 7 5Rank
2005 2015 2025
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Food, beverages, and tobacco
Apparel
Housing and utilities
Household products
Personal products and services
Transportation
Communication
Health care
Education and recreation
14
12
12
10
8
9
11
11
17
19
20
6
69
7 9 13
4
1 5
2
34100%
2025F
248
5
3
2015F
140
34
5
3
56
60
1995
2
3
25
42
82
2005E
3
5
6
Share of average household consumption%, thousand, Indian rupees, 2000
Note: Figures are rounded to the nearest integer and may not add up to 100%.
Source: McKinsey Global Institute
INDIA'S SHARE-OF-WALLET IS SHIFTING AS INCOMES RISE
Discretionary spending
Necessities
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Tapping Into the Indian ConsumerMarket
28 June 2007
The India-Europe Investment Forum
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Back-up
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11
0
100
200
300
400
1985 90 95 2000 05
Proprietary database
19852005
Econometric
forecasting model
20062025
On-the-ground insightsfrom McKinsey experience
0%
10%
20%
30%
40%
50%
60%
2006 2009 2012 2015 2018 2021 2024
What makes our
work unique?
Focuses on futureconsumption
Covers 100% ofdemand
Includes detailedincome distributions
Integratesmacroeconomic
scenarios
THE MCKINSEY GLOBAL INSTITUTE (MGI) HAS SPENT THE PAST YEAREXAMINING THE FUTURE OF THE INDIAN CONSUMER MARKET
Exclusive access to NCAER 300,000household MISH survey
Government NAS, NSS, and RBI data Other sources, e.g., UN, World Bank,
Oxford Economics
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MGIs FORECAST ASSUMES 7.3 PERCENT COMPOUND ANNUAL GDPGROWTH
0
20.000
40.000
60.000
80.000
100.000
120.000
1985 1990 1995 2000 2005 2010 2015 2020 2025
History Forecast
Real GDPbillion, Indian rupees, 2000
Source: McKinsey Global Institute
Overall compoundannual growth
Per capita compoundannual growth
6.0%
4.0%
7.3%
5.9%
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KEY FINDINGS
Indian incomes will triple over the next two decades,significantly reducing poverty
India will emerge as the worlds fifth largest consumereconomy
A large urban middle class will develop, but rural areas willbenefit too
Patterns of consumption will shift rapidly towardsdiscretionary spending
Income and consumption growth will create opportunitiesand challenges for business and government
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GROWTH HAS LIFTED 431 MILLION FROM POVERTY AND COULD LIFT465 MILLION MOREPopulation in households with annual disposable income less than 90,000 Indianrupees, 2000
millions of people
* Number added to deprived if poverty remained at 1985 and 2005 rates respectively
Source: McKinsey Global Institute
327431
180
465
313
598
702
Deprived in2025
Net reductionin poverty
Increase inpoverty dueto populationgrowth*
Net reductionin poverty
Deprived in2005
Increase inpoverty dueto populationgrowth*
Deprived in1985
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THE SHAPE OF INDIA'S INCOME PYRAMID WILL CHANGEDRAMATICALLY AS INCOMES GROW
Strivers (5001,000)
Seekers (200500)
Aspirers (90200)
Deprived (1,000) 1.2
10.9
91.3
101.1
2.4
Number ofhouseholds
million
Household incomebrackets
thousand, Indianrupees, 2000
Aggregatedisposable income
trillion, Indian rupees,2000
Source: McKinsey Global Institute
Aggregateconsumption
trillion, Indian rupees,2000
2.0
3.1
11.4
5.4
1.6
1.2
2.1
8.5
4.1
1.0
Strivers (5001,000)
Seekers (200500)
Aspirers (90200)
Deprived (1,000) 3.3
55.1
106.0
74.1
5.5
6.3
15.2
14.6
3.8
3.8
4.1
11.8
12.2
3.3
2.7
Strivers (5001,000)
Seekers (200500)
Aspirers (90200)
Deprived (1,000) 9.5
94.9
93.1
49.9
33.1
21.7
30.6
13.7
2.6
20.9
14.1
24.6
11.9
2.4
16.5
2005E
2015F
2025F
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THE INCOME DISTRIBUTION IN THE COUNTRY WILL WIDEN ASPOVERTY FALLS AND THE MIDDLE CLASS GROWS
-5
0
5
10
15
20
25
30
35
0 100 200 300 400 500 600 700 800 900 1000
Source: McKinsey Global Institute
Annual household disposable incomethousand, Indian rupees, 2000
Distribution of household income% of households
1985
1995
2005
2015
2025
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17
0
20
40
60
80
100
120
140
1985 1990 1995 2000 2005 2010 2015 2020 2025
FIRST ASPIRERS AND THEN SEEKERS WILL BECOME THE LARGESTINCOME BRACKETS
Source: McKinsey Global Institute
ForecastActual
Deprived (1,000)
Seekers (200500)
Number of households in each income bracketmillions of people
Household income brackets
thousand, Indian rupees, 2000
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KEY FINDINGS
Indian incomes will triple over the next two decades,significantly reducing poverty
India will emerge as the worlds fifth largest consumereconomy
A large urban middle class will develop, but rural areas willbenefit too
Patterns of consumption will shift rapidly towardsdiscretionary spending
Income and consumption growth will create opportunitiesand challenges for business and government
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RISING HOUSEHOLD INCOMES WILL BE THE KEY DRIVER OFCONSUMPTION GROWTH NOT CHANGES IN SAVINGS
Sources of growth in private consumption 20052025
billion, Indian rupees, 2000
16,896
69,503
8,360
Privateconsumption2005
42,326
Disposableincomegrowth
Growth innumber ofhouseholds
1,922
Changes insavings
Privateconsumption2025
80%
Contributionto overallconsumptiongrowth
16% 4%
Note: Figures are rounded to the nearest integer and may not add up to 100%.
Source: Oxford Economics; UN; McKinsey Global Institute
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KEY FINDINGS
Indian incomes will triple over the next two decades,significantly reducing poverty
India will emerge as the worlds fifth largest consumereconomy
A large urban middle class will develop, but rural areaswill benefit too
Patterns of consumption will shift rapidly towardsdiscretionary spending
Income and consumption growth will create opportunitiesand challenges for business and government
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URBAN INDIA WILL ACCOUNT FOR MORE THAN TWO-THIRDS OFCONSUMPTION GROWTH OVER THE NEXT 20 YEARS
Aggregate annual consumption
billion, Indian rupees, 2000
16,695
Rural
Urban
69,502
62%
57%
43%
16,896
All Indiaconsumption,2005
Ruralconsumptiongrowth
35,913
Urbanconsumptiongrowth
38%
All Indiaconsumption,2025
Contribution toconsumptiongrowth
Source: McKinsey Global Institute
32% 68%
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MIDDLE CLASS HOUSEHOLDS WILL DOMINATE URBAN INDIA
Share of urban households by income class%, millions of households
81
46
219 5
18
50
66
32
12
00100% =
34
53
8333
1985
14
46
1995
12
10
2015F2005E
6
26
51
114
2025F
1 Global (>1,000)
Strivers (5001000)
Seekers (200500)
Aspirers (90200)
0
Deprived (
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LARGE CITIES TEND TO HAVE HIGHEST INCOMES,BUT SMALL NICHE CITIES PROSPERING TOO
0
50
100
150
200
250
300
350
400
0 2 4 6 8 10 12 14 16 18 20
Delhi
Kolkata
HyderabadChennaiPune
BangaloreAhmedabad
Estimated population, 2001million
Average annual household disposable income, 2001thousand, Indian rupees, 2000
Total disposableincomebillion, Indian rupees
Tier 1 Tier 2
Ludhiana
Surat
Nagpur
Kanpur
Tier 3
MumbaiCoimbatore
Chandigarh
Faridabad
Amritsar
Jallandhar
Goa
LucknowJaipur
Nichecities
Source: The Great Indian Middle Class, NCAER; McKinsey Global Institute
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RURAL POVERTY WILL DECLINE SIGNIFICANTLY BY 2025
8
32
47
48
20
60000
0
2005E
1
46
875
2015F
12
29
906
2025F
Global (>1,000)682
Seekers (200500)
Aspirers (90200)
Deprived (
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PER-HOUSEHOLD CONSUMPTION IN RURAL INDIA WILL REACHTODAY'S URBAN LEVELS BY 2017
158
104
67
5045
116
UrbanIndia,2005E
1985 1995 2005E 2015F 2025F
Average consumption per household
thousand, Indian rupees, 2000
Source: McKinsey Global Institute
Rural India
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KEY FINDINGS
Indian incomes will triple over the next two decades,significantly reducing poverty
India will emerge as the worlds fifth largest consumereconomy
A large urban middle class will develop, but rural areas willbenefit too
Patterns of consumption will shift rapidly towardsdiscretionary spending
Income and consumption growth will create opportunitiesand challenges for business and government
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FALL IN SHARE OF SPENDING ON NECESSITIES IN INDIA ISCOMPARABLE TO SOUTH KOREA'S DURING ITS HIGH-GROWTH PHASE
* Necessities include food and apparel; discretionary spending includes all other household spend categories.
Source: Euromonitor; India data from McKinsey Global Institute
Discretionary spend*
Necessities*
Share of average household spending
%
Discretionary
Food
Apparel
0
25
50
75
100
1981 1986 1991
0
25
50
75
100
1985 1995 2005 2015 2025
History Forecast
South Korea India
Per capitaincome
$, PPP, 2000
5,017 12,850 1,173 2,500 7,364
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NUMBER OF URBAN HOUSEHOLDS WITH DISCRETIONARY SPENDINGPOWER TO MULTIPLY TWELVE TIMES
44
58
6
29
11
8
2005E
23
49
2015F
7
94
2025F
Number of urban households with true discretionary
spending power*million
Source: McKinsey Global Institute
Globals (>1,000)
Strivers (5001,000)
Seekers (200500)
Household income brackets
thousand, Indian rupees, 2000
Middleclass
* Consumers with sufficient budget to have significant levels of choice-driven spending (beyond categories such as food,housing, health care, education, fuel and transport services)
12x
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INDIAN SPENDING PATTERNS WILL BE UNIQUE
Share of total consumption, %
Note: Figures are rounded to the nearest integer and may not add up to 100%
Source: Euromonitor, MGI China Consumer Demand Model v2.0, McKinsey Global Institute
Food beverages andtobacco
Apparel Personal products and
services
In line with benchmarks
15
414
21
510
19
68
23
413
35
114
42
68
25
511
U.S. Germany BrazilSouthKorea China
India(2005)
India(2025)
Consumption category
Housing and utilities Household products Education and recreation
Less than benchmarks195
12
2778
229
13
184
16
96
15
1235
1039
Transportation Communication
Health care
More than benchmarks
111
19
171
4
134
6
122
8
67
7
172
7
206
13
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FOOD WILL REMAIN THE LARGEST CONSUMPTION CATEGORY WHILECOMMUNICATIONS WILL GROW THE FASTEST
0
2
4
6
8
10
12
14
16
0.0 1.0 2.0 3.0 4.0 5.0
Food,beverages,and tobacco
(17.3)
Market size in 2025trillion, Indian rupees,2000
Housing andutilities (6.6)
Householdproducts (1.8)
Apparel(3.3)
Personal
products(7.4)
Healthcare(8.9)
Communications (4.3)
Education andrecreation (6.1)
Transport(13.8)
Source: McKinsey Global Institute
7.0 8.0
2005 market sizetrillion, Indian rupees, 2000
20052025 compound annual growth rate of aggregate consumption%
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KEY FINDINGS
Indian incomes will triple over the next two decades,significantly reducing poverty
India will emerge as the worlds fifth largest consumereconomy
A large urban middle class will develop, but rural areas willbenefit too
Patterns of consumption will shift rapidly towardsdiscretionary spending
Income and consumption growth will createopportunities and challenges for business andgovernment
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OPPORTUNITIES AND CHALLENGES FOR BUSINESSES
Opportunities
Along with China the fastest growing of worlds large consumer marketsover next two decades
Major discontinuity, winners have yet to be determined $1.1 trillion ofnew market growth not yet owned by anyone
Most accessible market upper income urbanities will grow twelvetimes
Almost half of middle class will be new consumers at any point in time
loyalties up for grabs
Challenges
Indian companies Retaining existing customers and market shares Adapting rapid pace of change Innovating to capture new growth opportunities Educating new consumers
Multinationals Meeting middle class aspirations at Indian price Adapting products and services to meet Indian needs and task points Building brands Overcoming infrastructure, regulatory, and distribution hurdles
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OPPORTUNITIES AND CHALLENGES FOR GOVERNMENT
Opportunities
A chance to make further significant inroads in poverty reduction Domestic demand growth will spur further domestic production and
employment particularly in higher value-added industries An opportunity to attract FDC to serve Indian consumers The potential to improve the material well-being of hundreds of millions
of people
Challenges Long-term growth must be maintained Infrastructure issues need to be addressed Regulatory constraints on business need further reform to enable
businesses to meet growing demand and improve productivity Financial system needs reform to efficiently allocate investment, re-
balance savings away from households and provide consumer credit Significant investments in human capital required (education, health
care) in fiscally constrained environment
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INCOME BRACKET CONVERSIONSHousehold annual disposable income, real 2000
Source: NCAER The Great Indian Middle Class; McKinsey Global Institute
Bracket Indian rupeesU.S. dollarsnon-adjusted
U.S. dollarsPPP adjusted
Globals
Strivers
Seekers
Aspirers
Deprived
1,000,000 plus
500,0001,000,000
200,000500,000
90,000200,000
Less than 90,000
21,882 plus
10,94121,882
4,37610,941
1,9694,376
Less than 1,969
117,647 plus
58,823117,647
23,52958,823
10,58823,529
Less than 10,588
Middleclass
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BACK-UP
Macroeconomic base case
Urbanization, rural growth and education
Additional results
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MGI'S BASE-CASE GDP FORECAST IS MIDDLE OF THE RANGE
2.7
4.2
4.3
4.7
4.7
5.7
5.9
6.2
6.2
7.1
7.2
7.2Planning CommissionHigh
HSBCHigh
Goldman SachsBase
HSBCBase
Deutsche BankHigh
MGI/Oxford EconomicsBase
Planning CommissionBase
EIU
Global Insight
PWC
Deutsche BankBase
Deutsche BankLow
Source Real per capita GDP growthCompound Annual Growth Rate, %
Source: Oxford Economics; India: Pitfalls and Possibilities, HSBC, July 2006; India's rising growth potential, GoldmanSachs, Jan 2007; India Rising: A Medium-Term Perspective, DB Research, May 2005; Towards Faster and MoreInclusive Growth: An Approach to the 11th Five Year Plan, Planning Commission, Government of India, June2006; The World in 2050: How Big will the Major Emerging Market Economies Get and How Can the OECDCompete?, PWC, 2006
Timeframe
20052015
20062020
20072012
20052025
20062020
20062020
20062025
20052025
20052050
20072012
20052015
20062020
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SERVICES WILL CONTINUE TO BE THE MAIN DRIVER OF GDP GROWTHOVER THE NEXT TWO DECADES
Note: Figures are rounded to the nearest integer and may not add up to 100%.
Source: McKinsey Global Institute
24
26
2736
199
40
8.8
1985
55
28.3
2005E
65
115.3
2025F
Agriculture
Industry
Services
100% =
Share of GDP%, trillion, Indian rupees, 2000
2.7Agriculture
6.4Industry
7.8Services
3.1
7.4
8.2
2005202519852005
Growth by sectorCompound annual growth rate, %
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INCOME GROWTH WILL ACCELERATE WITH ECONOMICGROWTH
5.75.7
19851995
6.06.3
19952005E
6.4
7.3
2005E2015F
7.47.2
2015F2025F
GDP versus household disposable income growth
compound annual growth rate, %, Indian rupees, 2000
Source: McKinsey Global Institute
GDP
Householddisposable income
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INDIA'S CONSUMPTION SHARE OF GDP IS CLOSER TO JAPAN AND THEUNITED STATES THAN IT IS TO CHINA
44
23 2820
14
18 12
16
-6
Privateconsumption
Governmentconsumption
39
Net trade
100% =
3
2,216
China
57
1
4,553
Japan
62
-2
801
India
70
12,456
UnitedStates
Investment
Source: Global Insight; McKinsey Global Institute
%, billion, nominal $, 2005
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* MGI estimate based on 2005 GDP and estimates of flow-of-funds information.
Source: Country National Accounts; IMF; McKinsey Global Institute
21,1
16,28,1
10,47,8
11,3
-0,5
10,27,3
21,3
6.4
-1.3
26.4
Japan
7.9
2.9
21.2
Mexico
9.9
0.3
18.0
France
2.1
12.922.0
50.4
China*
22.3
2.0
32.4
India
6.4
32.8
SouthKorea
UnitedStates
Corporations
Households
Government
Gross national savings rates% of nominal GDP, 2005
INDIA HAS A RELATIVELY HIGH NATIONAL SAVINGS RATE COMPAREDWITH OTHER COUNTRIES
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* MGI estimate based on 2005 GDP and estimates of flow-of-funds information.
Source: Country National Accounts; IMF; McKinsey Global Institute
Household savings as a share of gross national savings rates, 2005
%
INDIAN HOUSEHOLD SAVINGS ACCOUNT FOR A DISPROPORTIONATESHARE OF NATIONAL SAVINGS
1620
24
37
44
55
69
India France China* Mexico Japan SouthKorea
UnitedStates
32.4 18.0 50.4 21.2 26.4 32.8 12.9
Gross nationalsavings rates% of nominalGDP, 2005
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INVESTMENT WILL GROW APPROXIMATELY IN LINE WITH GDP
Source: National Accounts; McKinsey Global Institute
Expenditure share of real GDP
%
-10
0
10
20
30
40
50
60
70
80
1985 1990 1995 2000 2005 2010 2015 2020 2025
ForecastHistory
Private consumption
Investment
Government consumption
Net trade
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Government expenditures and revenues*
0
5
10
15
20
25
30
35
40
1985 1990 1995 2000 2005 2010 2015 2020 2025
-11,0
-10,0
-9,0
-8,0
-7,0
-6,0
-5,0
-4,0-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
GOVERNMENT SPENDING AND DEFICIT WILL GRADUALLY DECLINE ASA PROPORTION OF GDP
* Government expenditure figures are available through 2005.
Source: McKinsey Global Institute
Government budget deficit
History Forecast
Revenues (left scale)
Expenditures (left scale)
Deficit (right scale)% of GDP
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BACK-UP
Macroeconomic base case
Urbanization, rural growth and education
Additional results
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INDIA REMAINS LESS URBAN THAN ITS COUNTERPARTS IN ASIA, BUTDEFINITIONS VARY
Source: United Nations World Urbanization Prospects 2005; McKinsey Global Institute
81
696665
48
40
2927
Vietnam India China Indo-nesia
Malaysia Japan UnitedStates
Korea,Rep.
Urban share of total population, 2005
%
Urbanpopulation,2005million
23 318 530 108 17 84 210 39
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BIRTHS AND MIGRATION WILL DRIVE URBAN POPULATION GROWTH
Urban population, 20052025*million
105
100
523
318
Urbanpopulation,2005E
Net births Netmigration
Urbanpopulation,2025F
* Estimate of birth versus migration split assumes urban birth rate = 19 per 1,000 and death rate = 6 per 1,000
Source: McKinsey Global Institute
1.6 x
Share of totalpopulation orurbanization rate
29% 37%
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CLASSIFICATION OF CITIES AND TOWNS
* Population for each city estimated using the average urban household size (from MGI model) and the estimatednumber of households in each city from NCAER (in the year 2001).
Source: The Great Indian Middle Class, NCAER; McKinsey Global Institute
MumbaiKolkata, Delhi,
ChennaiBangaloreHyderabad
Ahemdabad, Pune
Surat, Kanpur, Nagpur, Lucknow,Jaipur, Kochi, Vadodara, Indore,
Ludhiana, Madurai, Bhopal, Patna,Nasik, Agra, Varanasi, Rajkot, Meerut,
Jabalpur, Dhanbad, Kozhikode . . . .
Tiruchirapalli, Amritsar, Faridabad, Aurangabad,Allahabad Gwalior, Jodhpur, Raipur, Bhubaneshwar, Goa,Pondicherry Aligarh, Moradabad, Mangalore, Gorakhpur,
Bhavnagar
Rohtak, Rourkela, Udaipur, Anand, Faizabad, Hassan,Shimla, Roorkee, Gurgaon, Shillong
Tier 1: Major cities
Tier 2: Mainstream cities
Tier 3: Climbers
Tier 4: Small towns
26 cities
Population >1 million
33 citiesPopulation >500,000
8 citiesPopulation > 4 million
Total income >100 billion Indian rupees
5,094 towns
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HIGHER INCOME HOUSEHOLDS CONCENTRATED IN LARGE CITIES,POOR IN SMALL TOWNS
63
43
27 2522
9
9
98
8
Strivers
60
10
Deprived Globals
Tier 1: Major cities 15
13
47016,809
33
16
34,139
Aspirers
50
13
3,750
Seekers
55
12
806
Tier 2:Mainstream cities
Tier 3: Climbers
Tier 4: Smalltowns
100% =
Proportion of households in each income class across city tiers, 2001%, thousand, households
Note: Figures are rounded to the nearest integer and may not add up to 100%.
Source: The Great Indian Middle Class, NCAER; McKinsey Global Institute
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RURAL EMPLOYMENT HAS BEEN GRADUALLY SHIFTING AWAY FROMAGRICULTURE
7567
74
52
7
1987
8
7
8
47
2004
Manufacturing
Construction
Trade, hotelsand restaurants
Transport, storageand communication
Others*
Agriculture
* Sectors with minimal shift in this period (6% in other services, 1% in mining, quarrying, electricity and water).
Note: Figures are rounded to the nearest integer and may not add up to 100%.
Source: Employment and unemployment situation in India (200405), NSSO; McKinsey Global Institute
Distribution of rural male workers by economic activity%
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AGRICULTURAL GROWTH IS FORECAST TO ACCELERATE FROM ITSRECENT HISTORICAL RATE
Agricultural value added in GDP
billion, Indian rupees, 2000
Source: McKinsey Global Institute
Compound annualgrowth rate
9,974
7,529
5,462
4,299
1995 2005E 2015F 2025F
2.4%
3.1%
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* Enrollment is measured as a percentage of 15 to 24 year old population; attainment is measured relative to 15and above population.
Source: McKinsey Global Institute
ACHIEVEMENT IN HIGHER AND SECONDARY EDUCATIONWILL CONTINUE TO BECOME MORE WIDESPREAD
Rate of secondary-school andhigher-education enrollment
Rate of secondary-school andhigher-education attainment
0
5
10
15
20
25
30
35
40
1985 1995 2005 2015 2025
Secondary
Higher% of relevant population groups*
History Forecast History Forecast
0
5
10
15
20
25
30
35
40
1985 1995 2005 2015 2025
History Forecast
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BACK-UP
Macroeconomic base case
Urbanization, rural growth and education
Additional results
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77
54
2410
15
32
51
36
17
712
0
8
10,098
1995
6
12
16,896
2005E
8
35
34,089
2015F
6
24
35
3
69,503
2025F
20
6,6792
1985
15
100% Globals (>1,000)
Strivers (5001,000)
Seekers (200500)
Aspirers (90200)Deprived (
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HALF OF URBAN CONSUMPTION WILL COME FROM UPPER INCOMESTRIVERS AND GLOBALS
64
267
28
56
55
17
0100% 2
17
2.2
1985
26
10
4.0
6
1995
12
8
7.2
2005E
18
10
53
2
17.4
2015F
26
33
37
4
Global (>1,000)
1
43.1
2025F
Strivers (5001000)
Seekers (200500)
Aspirers (90200)Deprived (
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ASPIRERS WILL DRIVE RURAL SPENDING OVER THE NEXT TWODECADES
84
72
37
188
79
15
33
6
8
612
6
26.4
2025F
0
Strivers (5001,000)
Seekers (200500)
Aspirers (90200)
Deprived (1,000)
2
9
4.5
1985
04
17
6.1
1995
34
55
47
9.7
2005E
16.7
2015F
39
Share of rural consumption by income class%, trillion, Indian rupees, 2000
Household income brackets
thousand, Indian rupees, 2000
Note: Figures are rounded to the nearest integer and may not add up to 100%.
Source: McKinsey Global Institute
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CONSUMPTION BY NEW-TO-BRACKET CONSUMERS WILLBE SIGNIFICANT, ESPECIALLY IN THE MIDDLE CLASS
* Calculated by determining the number of households that have shif ted income class, assume they consume at newbracket levels in the first year, and then consider them new to that bracket for three years.
Source: McKinsey Global Institute
New-to-bracket share of cumulative consumption 20052025*%, trillion, Indian rupees, 2000
78
57
59
89
Globals
Deprived 70.9
Aspirers
22 111.5
100% =
93.4Strivers
11 245.8
Seekers 41 262.6
43
Middle
class
New-to-bracketconsumers
Existingconsumers
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FROM ASPIRER TO STRIVER THE EVOLUTION OF SPENDING FOR ATYPICAL HOUSEHOLD
63 90
23
4248
119
47
46
69
40
24
49
13
22
Food, beverages, and tobacco
Apparel
Housing and utilities
Household products
Personal products and services
Transportation
Communication
Health care
716
7211 5
94
Aspirer2005E
137
186
12
Seeker2015F
13
497
Striver2025F
214
Education and recreation
Average household consumption
thousand, Indian rupees, 2000
Source: McKinsey Global Institute
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SHARE-OF-WALLET ON FOOD IS ALREADY LOW IN MIDDLE- ANDUPPER-INCOME BRACKETS
6172 79
39
Aspirers
28
Seekers
21
Strivers
Food, beveragesand tobacco
Other spendingcategories
100%
4253
65
58
Deprived
47
Aspirers
35
Seekers
Food, beveragesand tobacco
Other spendingcategories
100%
58
66
75
42
2005E
34
2015F
25
2025F
Food,beveragesand tobacco
Otherspendingcategories
100%
All India average share-of-wallet evolutionShare-of-wallet of urban households in 2005E
Share-of-wallet of rural households in 2005E
%
Source: McKinsey Global Institute
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* Approximately 90% of spend on the broad category food, beverages, and tobacco is on food.
Source: McKinsey Global Institute
FOOD CONSUMPTION WILL ACCELERATE SIGNIFICANTLYEVEN AS ITS RELATIVE SHARE DECLINES
3,931
1985
5,622
1995
7,147
2005E
11,547
2015F
17,296
2025F
3.0%
4.5%
Total consumption of food,beverages, and tobacco*
billion, Indian rupees, 2000
Per-capita consumption of food,beverages, and tobacco*
Indian rupees, 2000
12.102
9.035
6.4546.058
5.207
1985 1995 2005E 2015F 2025F
1.1%
3.2%
Share of totalconsumption%
59 56 42 34 25 59 56 42 34 25
Compoundannualgrowth rate
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FIVE CATEGORIES WILL ACCOUNT FOR MORE THAN 80 PERCENT OFCUMULATIVE CONSUMPTION OVER THE NEXT 20 YEARS
Breakdown of total cumulative consumption across categories (20052025)
trillion, Indian rupees, 2000
S M Ki Gl b l I i
784
41
54
Household products
Communication
Apparel
Education and recreation
Totalgrowth
248
Food,beverages,
andtobacco
148
Transport
87
Housingand
utilities
79
Healthcare
74
Personalproducts
andservices
3222
148
Other