‘India maintains lead in consumer optimism’

Although 2018 brought some cyclical challenges, India maintains top ranking in overall consumer sentiment, while Brazil has overtaken China to come second, a report by Credit Suisse Research Institute has said.

According to the Credit Suisse Global Wealth Report, India’s resilient economy and improvements in infrastructure such as roads, internet, and electricity, were termed positive drivers, while China appears to be seeing the effects of the US-China trade tensions with a tempering consumer confidence. It added that China’s prevailing real wage growth is at its lowest in seven years.

In terms of the growing relevance of the consumer, India and China are expected to make up 15 per cent of global consumption by 2030, with the report noting that India’s share is set to double between 2016 and 2030.

Noting that both markets have benefited from a demographic dividend, the report said each country is at a different stage. “China is now already at a demographically higher stage of development than India. Yet, with its working-age population soon to surpass that of China, India has better long-term demographics for growth,” it said.

Still ranking high in relative terms and holding the second largest pool of wealth worldwide, China’s enrichment has been very impressive, the report said.

Growth in wealth

In the last 18 years, wealth per adult in China has multiplied by 11 times, (from $4,000 to nearly $50,000 today), compared to four times in India (from $1,826 to $7,024).

During the time period, 52 per cent of population in China moved to the $10,000-$100,000 wealth bracket, while 7 per cent of the population moved to the $100,000-$1,000,000 bracket. To put both economies in perspective, India's aggregate wealth today represents only 10 per cent of China’s.

Consumption patterns

Highlighting the growth potential for consumer goods and services versus GDP/per capita, the report notes that growth potential for apparel and meat will be high in India, with its GDP pegged at $2,000-$5,000, whereas education, healthcare, consumer credit, beauty products and tourism feature high in China, with its GDP pegged at $10,000- $25,000.

The report noted that patterns of consumption are set to evolve. Although most of both Chinese and Indians’ incomes are still spent on basic necessities such as food and non-alcoholic beverages, the pro-rata allocated to it has nearly halved over the past 30 years. This mix shift should continue as wealthier consumers tend to spend a larger proportion of their income on non-essential goods such as durables and consumer services.

While Asia has been at the heart of the emerging consumer theme, the report notes political rupture in Latin America’s largest economies has delivered a newfound optimism among consumers in Brazil and Mexico. The weakest survey readings were found in Russia and Turkey, which are suffering the economic fallout from weak currencies and political risks.

COMMENT NOW