Beyond the basics: climbing India’s consumption ladder

Please find below our latest thoughts on India:

• July has been another month marked by debate around geopolitics, tariffs, AI disruption, US monetary policy, and the broad outlook for global growth.
• Against this challenging backdrop, India equities are essentially flat compared to a nearly 5% drop in the MSCI Emerging Markets index month-to-date (in USD terms).¹
• For the first time in many months, foreign investor flows reversed course, injecting around USD 3.3bn since mid-June in a move that is seemingly rewarding a mix of factors including India’s broad investment set outside the AI cohort, policy measures designed to stabilise the rupee, and decent corporate earnings delivery.²
• Of companies that have reported June quarter earnings, 53% were above and 29% were in-line with estimates.³
• While the discussion around India often centres on external vulnerabilities and the direction of foreign flows, we see India’s domestic investor base as an increasingly important source of policy flexibility and market stability.
• Domestic investors participate in financial markets at a scale that would have been unimaginable a decade ago. Domestic institutions (DII) and retail investors account for 28% ownership in India’s BSE 500 compared to 17% for foreign institutional investor (FII) ownership. Private promotors and government largely make up the remainder.²
• The combination of rising incomes, greater financial literacy, and widespread digital access has encouraged households to shift some of their savings away from traditional assets such as gold, cash, and real estate towards financial products like mutual funds, insurance, and more sophisticated wealth management solutions.
• Another structural theme related to the trend of wealth accumulation continues to gather momentum: the rise of the premium consumer.
• To date, India's growth story has primarily been associated with rising mass consumption. The basic penetration of mobile phones, bank accounts, household appliances, and motorcycles has been a barometer of growth.
• While still an important part of the investment narrative, we believe a meaningful shift is underway. India's consumer story is no longer simply about more people buying things. It is also about consumers spending more on better products, higher-quality experiences, and premium brands.
• A high-income consumer segment representing just 10-15% of India's population would be larger than the entire population of many developed economies.
• The effects are already visible. Luxury car sales are outpacing broader auto market growth; premium housing is outperforming affordable housing in major cities. Many homebuyers are comfortable paying for lifestyle amenities such as gyms, pools, and badminton courts because Indian cities are crowded and offer limited public recreational spaces like parks or gardens.⁴
• Young Indians, many of whom are digital natives, are increasingly willing to pay for convenience, brands, experiences, and status. This differs from prior generations, where savings was often prioritised.

• Several forces are driving this consumption shift. First, India is steadily creating a larger base of salaried workers with stable incomes. Second, financial assets have performed strongly over the last decade, supporting household wealth creation. Third, the growth of skilled sectors like technology, financial services, consulting, and healthcare has created a sizeable cohort of affluent urban professionals.
• Another important factor is the physical transformation of Indian cities. Infrastructure investment has expanded airports, highways, metro networks, and digital connectivity. As mobility improves, consumers gain greater access to organised retail, premium services, and new consumption opportunities.
• There are important investment implications of this shift. In our view, the most compelling opportunity is in identifying the businesses that are successfully capturing this spending power.
• It is not solely a play on luxury goods like apparel and jewellery. Premiumisation benefits a wide ecosystem that includes financial services, hospitals, travel operators, specialty retail, ecommerce platforms, premium food and beverage companies, and real estate developers.
• This is because premium categories often enjoy stronger pricing power, higher margins, lower competitive intensity, and more attractive long-term earnings growth.
• Private equity is paying attention, and deal activity in this segment has been growing rapidly. Gourmet brownies, Belgian waffles, ceiling fans, and high-end mattresses were some of the consumption-related areas that attracted significant private capital in 2025, both from local firms and financial sponsors abroad.⁵
• 2026 has also seen a pickup in deal activity in the premium consumer space. A business focused on smart appliances for modern kitchens and another one on ayurvedic beauty care are just two examples of consumer start-ups attracting fresh funding rounds.⁶
• While global topics like manufacturing, supply chains, and artificial intelligence remain powerful trends, in the face of heightened geopolitical risk and foreign policy debates, sometimes it’s easy to overlook powerful secular trends unfolding at home.
• India's consumption story is no longer just about serving the next billion consumers. Increasingly, it is about serving a growing number of consumers who are becoming wealthier, aspirational, and more willing to spend.

¹ IDS, Allianz Global Investors, 28 July 2026.
² JP Morgan, India Equity Strategy, 25 July 2026.
³ Jeffries estimates, India Equity Strategy, 24 July 2026.
⁴ Macquarie, Oberoi Realty Sales Note - Changing the rules of the game! 27 July 2026.
⁵ India Private Equity Report 2026, Bain & Company, 14 May 2026.
⁶ Moneycontrol; ADIA, Fireside and others to invest over Rs 350 crore across premium consumer startups, 23 July 2026.

Back to Blog