As India’s consumption landscape evolves, we must strengthen our economic recovery

Subscribe to enjoy similar stories. India’s consumption landscape has undergone a significant transformation over the last two decades, influenced by shifts in income distribution, economic shocks and changes in spending behaviour. Data from PRICE’s ICE 360 pan-India household survey provide a detailed account of these trends, shedding light on the financial resilience of different income groups and the impact of events such as the pandemic.

Income distribution has evolved over time, with the bottom 60% of India’s population witnessing an increase in their income share from 27% in 2004-05 to 32% in 2015-16, signalling better economic inclusion. However, this progress was disrupted during the pandemic, with their share dropping to 23% in 2020-21 before recovering to 31% in 2022-23. The next 30% of the population experienced relative stability, maintaining an income share between 37% to 39%.

Meanwhile, the top 10% of the country’s population saw a decline from 36% in 2004-05to 30% in 2015-16, but gained significantly during the pandemic, reaching 39% in 2020-21 before settling at 31% in 2022-23. These trends highlight the pandemic’s role in widening income disparities, though a recent recovery points to improved equity. Household expenditure patterns have also reflected these financial dynamics.

The bottom 60% population consistently have a higher share in expenditure than their income share, emphasizing their importance in a consumption-driven economy. In 2015-16, for instance, they accounted for 39% of total routine expenditure while earning only 32% of total income. Their spending ability was severely affected during the pandemic, dropping to 30% in 2020-21, but showed a recovery to 36% in 2022-23.