India’s consumer market is far smaller than its population suggests, with only about 130-140 million people able to spend on non-essential goods, according to a report by Blume Ventures. Despite a population of 1.4 billion, around a billion Indians lack the disposable income for discretionary purchases. This has led to a unique economic trend: the wealthy are getting richer, driving demand for premium products, while the middle class is shrinking under stagnant wages and rising debt.
This consumption divide is fueling premiumisation, where brands focus on high-end products for the wealthy rather than mass-market goods. Luxury housing, premium smartphones, and branded goods are booming, while affordable products struggle. This trend underscores India’s K-shaped recovery, where the rich continue to prosper while the poor lose purchasing power.
The economic impact is significant. As income inequality widens, overall consumption is affected, leading to slower economic growth. The middle class, traditionally an engine of demand, is being squeezed by stagnant wages and rising costs. Additionally, automation threatens white-collar jobs, compounding financial pressures.
For economics students, this scenario highlights the consequences of income inequality, consumption patterns, and structural unemployment on economic growth and market dynamics. It’s a vivid example of how unequal wealth distribution shapes consumption trends and impacts macroeconomic stability.
THINK LIKE AN ECONOMIST!
Q1. Define the term structural unemployment.
Q2. Explain using a Lorenz curve diagram how income inequality has been increasing as part of this “K-shaped recovery”.
Q3. Evaluate the potential long-term effects of rising income inequality on economic growth and social stability in India.
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