India to Account for 16% of Global Consumption by 2050 Despite Current Slowdown

India is projected to account for 16% of global consumption at purchasing power parity (PPP) by 2050, the Business Standard reported, citing World Data Lab, a McKinsey Global Institute analysis. PPP compares the value of different currencies by adjusting for price differences between countries.

The report on “Dependency and Depopulation: Confronting the Consequences of new Demographic Reality” said that this consumption rate is up from 4% in 1997 and 9% in 2023. It also said that in 2050, India will be only behind North America with a 17% consumption share.

The research, released a few days back, highlighted some major implications because of the shift as income and consumption grow in markets like India, local and multinational companies will also have to adapt and meet changing local tastes and adapt their products and services to their needs.

The analysis also noted that support ratio, the number of working age people for every person above 65 years whom they have to support, in India is currently 9.8 and the same will halve by 2050 and drop to 1.9 by 2100, about the same as Japan today. It was indicated by the trajectory of births and deaths, and life expectancy.

Also, India’s share of world population, which was 23 per cent in 2023, is expected to fall to 17 per cent in 2050. In 2019, India’s fertility rate fell below the replacement rate. The replacement rate is the average number of children a woman needs to have to replace herself and sustain the population.

Read More | Can Government Make Indians Spend More to Support India’s Falling Growth Rate?

According to the research, India's demographic dividend contributed an average of 0.7% to the country's GDP per capita growth between 1997 and 2023. However, this benefit was offset by a 1.1% decline in labor intensity (the number of hours worked per worker) during the same period. Moreover, as the population ages, the demographic dividend is projected to add just 0.2% to India's per capita income growth by 2050.

Consumption Slowdown

The government data released late November last year had showed India's GDP growth slipped to a seven-quarter low of 5.4% in the July to September quarter of FY25. The growth was down from down from 8.1% in the same period last year and 6.7% in the previous quarter.

Weaker consumption was one of the major reasons behind this slowdown.

However, chief economic adviser V. Anantha Nageswaran remained optimistic, asserting that the 5.4% growth rate is likely "a one-off number," influenced in part by temporary cooling in urban demand during Q2, which he believes will not continue.