Rising incomes, premiumisation and demographic shifts are expected to reshape household spending as India’s economy expands, HSBC says
India’s next phase of consumption growth will be driven less by population growth and more by rising incomes as households move up the income ladder, according to HSBC.
In a note, HSBC said India’s scale, income growth and changing demographics point to a “powerful, multi-decade consumption tailwind”.
“India’s next phase of consumption growth will be driven less by sheer population increases and more by upward movement through the income brackets, particularly into segments where discretionary spend accelerates,” HSBC said.
The bank expects India’s economy to grow from around $4 trillion in 2025 to about $10 trillion by 2036. If real growth averages 6.5 per cent a year, the economy could reach around $30 trillion by 2050. At 7.5 per cent growth, it could reach about $35 trillion.
India could also become the world’s third-largest economy by 2031, behind the US and China, HSBC said, citing International Monetary Fund projections.
Rising incomes to reshape spending
HSBC said the next phase of consumption growth will come from “upward movement through the income brackets”, particularly as more households enter income groups where discretionary spending accelerates.
According to the bank, sustained growth of around 6.5 per cent could lift India from lower-middle-income to upper-middle-income status by 2032-33. The country could potentially reach high-income status by 2046-48, the bank said.
More from BusinessThe shift in spending is already visible. Between 2000 and 2025, GDP per capita increased roughly six-fold, while household spending on education, medical care, durable goods and consumer services also increased.
With per capita income potentially rising another five-fold over the next 25 years, HSBC expects these trends to gather pace. This could support stronger demand for discretionary products and premium services.
Demographics to change household priorities
HSBC expects the median age to rise to 38 years by 2050 from 29 currently. The old-age dependency ratio is expected to more than double, while a decline in the number of children could reduce the overall dependency ratio.
Over time, household budgets could therefore shift away from education and towards healthcare, personal care and higher-value services, HSBC said.
Wealth to support premiumisation
Rising wealth could strengthen premiumisation at the top end of the market.
The number of high-net-worth families with wealth above $30 million is expected to increase from around 13,300 in 2023 to about 20,000 by 2028, according to HSBC.
The bank also estimates that around $1.5 trillion of wealth could be transferred between generations over the next decade. That is equivalent to about one-third of India’s GDP.
HSBC said these trends could support demand for premium products, financial services and high-end experiences.
Investment cycle could add to growth
The consumption outlook comes alongside a broader investment cycle in India. A separate Jefferies India Equity Strategy report identified space, semiconductors, data centres, electronics, solar manufacturing and aerospace as six sectors that could shape the country’s next industrial growth cycle.
Jefferies expects India’s data centre capacity to increase from around 2 GW to nearly 10 GW over the next five years, requiring about $45 billion in facility capital expenditure. It also expects India’s space economy to expand from about $8.4 billion in 2023 to $40 billion-$45 billion by 2030.
The brokerage said government policy, private investment, India’s domestic market and its manufacturing base are creating opportunities across these sectors.
AI could disrupt the income story
Technology could provide another boost to productivity, but HSBC also flagged risks from the rapid adoption of artificial intelligence.
The bank said faster-than-expected AI integration is raising concerns about displacement in routine entry-level IT and customer-support jobs.
At the same time, demand for specialist and experienced AI professionals is increasing.
“This could further fragment the labour market,” HSBC said, with AI-skilled workers potentially commanding a premium while entry-level workers face weaker bargaining power.
