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- Indian households to have disposable income in 2024 with lower inflation & strong real income growth outlook.
- Consumer confidence index is back to its pre-Covid levels, up from its lows in 2020.
- India’s unemployment rate was stable over the year, at 7%, boosting consumer confidence.
The ghost of the pandemic is now a thing of the past. Consumer confidence index which hit a five-year low in 2020, has been on a recovery in 2023 and has returned to pre-Covid levels. This might push consumers to spend on big-ticket items, says Fitch Solution company BMI.
“We hold a positive outlook for consumer spending in India over 2024, as the wider Indian economy recovers and growth figures return to a more stable medium-term trajectory,” says BMI in its ‘India Consumer Outlook’.
Household spending in India will post strong growth over 2024, says BMI. Real household spending is expected to grow at 6.7% y-o-y over the year — an uptick from the 6.5% y-o-y growth estimated for 2023.
“This is supported by growing domestic demand as well as the expected recovery of wider international tourism,” the report said.
Indian economic forecast
| Particulars | 2023 forecast | 2024 forecast | 2025 forecast |
| Real GDP | 6.3% | 6.7% | 6.5% |
| Unemployment | 7% | 7% | 7% |
| CPI Inflation | 5.8% | 4.7% | 4% |
Source: National Statistics, BMI
Faster growth, benign inflation
The Indian economy is expected to grow at a real rate of 6.3% in 2023. The Fitch team forecasts it to grow faster at 6.7% year-on-year. Moreso, inflation worries are easing, allowing households to splurge more.
Inflation is expected to hover around 4.7% in the next year whereas 2023’s inflation numbers are pegged at 5.7%. “Inflation is moderating and strong showings in real income growth for Indian consumers will give greater propensity for household spending growth,” BMI says.
Moreover, India’s unemployment rate is also stable over the year, at 7%, boosting the confidence in spending habits.
Lower debt levels
Unlike most nations, Indian household debt has been steadily decreasing, to 36.5% as of Q1 2023. This decrease is due to the recovery from the acceleration seen in household debt during the Covid-19 pandemic period, where households took on debt to support themselves.
“These levels are still relatively low and pose little threat to our consumer outlook for the market,” BMI adds.
As household debt decreases, a part of the disposable income which is used to service debt can be used for purchases.
However, if the interest rates go up in the next three years, higher income households might have to allocate disposable income towards debt financing, placing downward pressure on consumer spending going forward.
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