REWRITING THE RULES

GEN Z'S BUYING HABITS ARE RESCRIPTING INDIA'S CONSUMPTION STORY

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Long-term trends in expanding economies often present substantial wealth-creation opportunities for investors.

One such trend in India is consumption. Over the past few decades, investors who identified and stayed with this theme have witnessed great gains, as consumption-oriented companies grew their earnings multiple times. Looking ahead, the entry of Generation Z into the workforce is expected to drive a new wave of consumption, opening up fresh avenues for investment.

GEN Z: THE EMERGING CONSUMER POWERHOUSE

Generation Z, comprising individuals born between 1997 and 2012, represents a consequential and growing portion of India's population. Currently, they make up around 25% of the working population, a figure projected to rise to nearly 50% by 2035. As the largest demographic group in the country followed by Millennials, Gen Z is poised to become a dominant consumer pool in shaping consumption trends in the Indian economy.

With the rise in per capita income, consumption patterns are expected to evolve. As income grows, households tend to spend proportionately less on necessities like food and clothing, and more on discretionary items and experiences. This shift bodes well for sectors catering to lifestyle, entertainment, healthcare, and travel - areas where Gen Z is likely to direct a larger share of their income.

STRUCTURAL DRIVERS SUPPORTING CONSUMPTION GROWTH

After the Indian economy opened up to global trade in 1991, the country witnessed a surge in the availability of new goods and services. These were introduced at various price points, reflecting a differentiated value proposition that catered to all segments of the population - the rich and affluent, the rising middle class, and those at the bottom of the pyramid. Over time, Indian consumers have gradually evolved in both preferences and purchasing power.