A Goldman Sachs report Released on Friday – ‘rise of prosperous india‘ – Defines prosperity as an income of more than $10,000 per year, Rs 8.3 lakh at current exchange rates. Goldman analysts say this segment currently numbers 60 million but will grow to 100 million by 2027, a massive 67% growth.
The report said that currently about 4% of the working population earns more than $10,000 annually (this figure is almost five times the per capita income of $2,100, approximately Rs 1,75,000). This segment has expanded rapidly – growing by 12% compound annual growth between 2019 and 2023, while the population has grown by 1% over the same period.
The sharp rise in prosperity has also meant a significant increase in financial and physical assets, including equities, gold and property, during the last three years. “This increase is the largest for equities and gold, while asset prices have seen a high rate of appreciation in the last three-four years,” it said.
Goldman analysts say the number of demat accounts will grow 2.8 times to 114 million in 2023, and stock ownership (BSE 200 stocks) and mutual fund investments will increase. The value of gold held by Indians is set to increase by 63% to $1.8 trillion between 2019 and 2023.
Other results: Strong growth in demand for premium products across all industries including FMCG, footwear, fashion, passenger vehicles and two-wheelers, outperformance by companies focused on top-income consumption. Sectors that hit the jackpot are jewellery, travel, premium retail and high-end healthcare.
Even the company’s product portfolio is feeling the change. So, not only has Nestle grown faster than Hindustan Unilever, but HUL’s premium portfolio has grown faster than its total revenue. Using credit card spending as a proxy for consumption by the rich, the report said credit card ownership has increased by 80% since fiscal 2019 and credit card spending by 250% over the same period. There has been an increase (calculation is based on the average of the last 12 months).
Importantly, Goldman analysts argue that this top-end consumption boom is here to stay. Leisure, away-from-home dining, jewellery, institutional medical services and durables are the sectors that will gain the most as prosperity increases. They also rule out Covid as a factor. “The initial hypothesis was that the difference in consumption by companies addressing top-end consumption, compared to companies addressing broad-based consumption, was due to the impact of Covid restrictions. Covid restrictions have a greater impact on low-income jobs service industries, such as hotels and restaurants. However, Covid restrictions were fully lifted in early 2022, and yet the gap in growth rates has continued until the end of 2023. We are now looking forward to seeing all restrictions lifted. It’s 24 months after 2015, and most of the services that were closed during Covid have fully opened. The gap was not just due to Covid restrictions, but because of the radically faster growth of ‘Samrudh Bharat’…”
The report identified changes in government tax policy, corrections in stock and gold prices and competition for established companies from new entrants as potential risks.
