BENGALURU: Indian youth, dominating the county’s 130-million strong urban mass, will drive the consumer market growth over the next 5-10 years, multinational banking firm Goldman Sachs said in a report on Tuesday.

“We believe India’s youth who dominate its 130-million strong urban mass, earning $3,200 (Rs.21,361) on average per month, will be the key driver of the country’s consumption story in the next 5-10 years,” the report titled ‘India Consumer Close-Up)’ said.

The report is part of Goldman Sachs’ ‘Asian Consumer’ series.

“With a young, tech-savvy population, improved education and rapid growth, India is creating a consumer market deeply tied into mobility and connectivity,” it pointed out.

With the world’s second biggest population (1.3 billion), including 440-million millennials (adults) and 390-million Generation Z (teens and children born after 2000), India is set to witness a consumer boom over the next two decades, it said.

“Unlike in China, where consumer spending is driven by its 150-million urban middle class and 1.4-million wealth movers and shakers, the consumer growth in India is underpinned by its urban mass, though its urban middle (class) accounts for just 27-million working force or two percent of its population,” the report noted.

Noting that consumer spending in India would shift as its urban mass segment grows, the report said the consumer growth would be driven by life’s essential needs (food, clothing and house) and growing consumption trends spanning eating better, looking better, mobility, connectivity, having more fun, well-being and luxury.

“Though these consumption patterns are common, with profound effects on consumer behaviour, half of India’s population is vegetarian, whisky sales dwarf beer andĀ families save for years to spend on their child’s wedding,” the report observed.

Indian firms engaged in packaged snacks and dairy products, restaurants, premium personal care products, baby products, smartphones, scooters and branded jewelry are well positioned to benefit from the rise of the consumer class.

“Mobile connectivity and ecommerce stand to leapfrog traditional retail as channels for reaching young and tech-savvy consumers ,” it said.

As the sheer size of India’s youth combined with improved education paves the way for sustained growth in purchasing power, the challenge is to create enough jobs to unleash productivity of its demographic dividend.

“Hence, brand investing will be a big theme, as the urban mass will trade up into brands that offer incremental value and quality. In purchasing a car, for example, for an Indian consumer, an important input is the brand’s reputation for fuel efficiency,” the reportĀ averred.

“Improved mobile connectivity will also challenge the domination of television as a primary source of household entertainment over time, creating a bigger profit pool for content providers and mobile gaming,” the report said.

As the affluent consumers tend to shy away from ostentatious display of wealth, growth of luxury and high-end goods will be limited.

“Since Indians splurge on weddings, their numbers will increase over the next five years along with household formations in view of the demographics,” the report added.