Household consumption growth to remain impacted in 2021: BCG Report
The current pandemic is likely to shape consumer thinking and consequently impact shopping behaviour, and the overall consumption growth is likely to get delayed by up to two years, said a report by Boston Consulting Group.
Household consumption is going to be negatively impacted over 2020 and 2021, it said.
"Our consumer income and expenditure model suggests that total household consumption spending is likely to reach Rs 290-300 trillion (Rs 300,000 crore) by 2030, similar to our initial pre-COVID estimates for 2028," the BCG report said.
The average annual household income is expected to rise to around Rs 7.3 lakh by 2030, nearly 40 percent higher than it is today but 7-8 percent lower than pre-COVID estimate.
Over the last decade, household consumption in India grew 13 percent year on year to reach Rs 120 trillion in 2019. "This saw an increase across categories with the highest growth in services like health, education and leisure, indicating the changing lifestyle and preferences of consumers, and the rise of many new-to-the-world categories," said the BCG report.
In the coming decade, this strong growth trajectory was expected to continue on the back of four key pillars Affluence (sustained rise in average household incomes), Attitude (positive sentiment towards the economy and personal financial situation), Awareness (due to enhanced connectivity, travel, and media), and Access (both digital and physical).
However, two of these factors, Affluence and Attitude, have been impacted by COVID. This will lead to three key shifts in how India spends.
It further said there are likely to be some short-term shifts in the shape of consumption expenditure.
Rural consumption has been relatively resilient through the pandemic, but the trend is unlikely to sustain over the long term.
With the proportion of high-income households getting widely distributed across approximately 100 cities in the country, the contribution of Tier II, III and IV cities (all with populations below 1 million) to the consumption boom is likely to increase, said the report titled 'How India Spends, Shops and Saves in the New Reality'.
The consumption patterns in the country are currently undergoing a deep transformation, one that is giving birth to unique challenges and opportunities for companies.
"Companies looking to gain consumer trust and capture their share of the consumption spend should focus on re-designing their existing strategies, it said.