The Income Pyramid.
- According to India’s premier economics research agency NCAER, the top of India’s income pyramid has around 1.2 million homes with an annual income of Rs 1 million and above (> US$ 22000 in nominal terms, and $ 115,000 in PPP terms) (Globals) *
- The second layer is 2.4 million homes, with an annual income of Rs 0.5 -1 million (US$ 11-22000 in nominal terms, and $ 58-115,000 in PPP terms) (Strivers) *
- The third tier is 10.9 million homes with an annual income of Rs 0.2 -0.5 million (US$ 4500-11000 in nominal terms, and $ 23-58,000 in PPP terms) (Seekers) *
- The bottom of the pyramid is made up by the remaining 192 million homes including 101 million families living in poverty conditions), which have negligible disposable income (91 million households- (Aspirers)* and 101 million households -(Deprived)*
* Terms used by Mckinsey & Co. in their report "Bird of Gold"
Income growth trends:
- The consuming class covering the top three tiers presently numbering 14.5 million homes, has an aggregate disposable income of 7 trillion rupees, which would rise to 25 trillion rupees (64 million homes) by 2015, and 73 trillion rupees (137 million homes) by 2025.
- By 2015, 3.3 million homes would have annual incomes exceeding Rs 1 million, with a disposable income of 6.3 trillion rupees (1.2 million homes and 2.0 trillion rupees in 205). This would go up to 9.5 million homes by 2025, with a disposable income of 22 trillion rupees. Luxury consumption would be mainly driven by the rising incomes in this group.
- Similarly, by 2015, 5.5 million homes would have annual incomes of Rs 0.5- 1 million, with aggregate disposable income of 3.8 trillion rupees (2.4 million homes and 1.6 trillion rupees in 205). This would go up to 33 million homes by 2025, with a disposable income of 21 trillion rupees.
But, how rich are India’s richest?
- In dollar terms, India’s richest households (globals) represent an aggregate disposable income of 44 billion dollars, growing to 140 billion dollars by 2015 and 482 billion dollars by 2025. The second echelon represents a current disposable income of 36 billion dollars, growing to 84 billion dollars by 2015 and 464 billion by 2025.
- Yet, in per capita terms, this translates to 9900 dollars per year for the richest households in 2005, going up to 11500 dollars per year by 2015 and 13500 dollars per year by 2025. For the next echelon, the corresponding values are 3900 dollars per year in 2005, going up to 4100 dollars per year by 2015 and 3800 dollars per year by 2025.
Now, is that really a growth market for uber luxury goods?
Triangulation: India’s High Net Worth Individuals
- According to a Merrill Lynch Cap Gemini Report, in 2007, India is estimated to have over 100,000 HNWIs, i.e. people with over one million US dollars in assets.
- This elite group has grown by 20% over the last year (83000 dollar millionaires in 2006), and has assets worth over US$ 350 million.
- More than half of India’s HNWIs are in the age group 40-55.
These numbers give a more realistic idea of where India’s private consumption is concentrated.
In our next newsletter, we shall attempt to peel through India's Luxury goods markets.
Chart 1. India’s households by income classification (million families)
Chart 2. Aggregate Disposable Income, US$ billion (taken at exchange rates 2000)
Chart 3. Per Capita Disposable Income, US$/year (assuming 4 persons per household)
Acknowledgements:
NCAER India Demographics Report,
McKinsey Quarterly,
Merrill Lynch Cap Gemini Asia Pacific Wealth Report
We Shall Update the Subsequent entries shortly.
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