Why Indians are more daring to spend money than the Chinese: What does native Indian payment mean?

In response to the current lack of consumption, an important situation facing our economy, we have been encouraging the cultural and tourism industries to increase consumption as a way to stimulate the economy in recent years. In this context, India's consumption data is particularly striking. According to statistics, India's final consumption expenditure of residents in 2023 accounted for 60% of GDP, which is lower than that of the United States (82%) and Japan (77%), but much higher than that of China (53%).

The following charts provide a more visual representation of the situation. While there is a gap between our country and the developed world, why is India's consumption rate higher than ours?

In everyone's impression, India has always been a very poor country. According to the extreme poverty criteria set by the World Bank, if a person's daily income is less than US$2.15, that is, about RMB 15 yuan, then they are regarded as extremely poor. In India today, there are still 83 million people earning less than Rs 15 per day, which means that one out of every 17 Indians you meet earns less than Rs 15 per day. It is safe to say that if you don't make money today, you might go hungry tomorrow.

Yet again, India is a country of contradictions. Despite poverty, Indians are willing to consume. For example, Indians have this particular habit that most people around the globe find difficult to accept - drinking cow urine. They mix cow urine, cow dung and spices to make a drink that is sold in the market.

In India, cow urine drinks are sold at prices ranging from a few yuan to 80 yuan, far above the daily cost of living for the average Indian. However, millions of bottles of cow urine drinks are still sold every year, with a market size of billions of RMB, demonstrating the spending power of Indians.

Another habit of Indians is that they like to make phone calls. Many Chinese abroad have noticed that Indians always keep their mobile phones handy and call their families whenever they can. Unlike the Chinese habit of texting whenever possible, Indians prefer to call to discuss anything. Even when responding to questions on public social media platforms, they often ask for phone numbers for private calls. This habit has also fuelled their interest in new smartphones. Data shows that around 50% Indians plan to replace their smartphones within a year. The Indian smartphone market has grown 20 times in the last nine years. in the first half of 2024, smartphone shipments in India reached 69 million units, a year-on-year growth of 7.21 TP3T.

Major global smartphone manufacturers such as Apple, Xiaomi, Samsung, Vivo and OPPO are competing fiercely in the Indian market, all hoping to get a piece of the pie. As one of the fastest growing economies in the world, India's rapid GDP growth in recent years has been largely dependent on rapid growth in private consumption by the population.

In March this year, the Indian Bureau of Statistics released a household consumption survey conducted every five years. According to the survey data, per capita monthly consumption in India will be Rs. 4,794 in 2023, which is about Rs. 400, a CAGR of 8.91 TP3T compared to the 2013 survey results.

In terms of the composition of India's GDP, private consumption has the highest share and is the fastest growing, showing a year-on-year upward trend from 551 TP3T in 2010 to 591 TP3T in 2023.

One may wonder what exactly is the reason behind India's high consumption rate. The most fundamental reason is India's huge population. Many people who visit India are shocked by the size of its population. The airports are crowded and the streets are busy.In April 2023, India overtook China as the most populous country in the world with a population of 143 million.

A population of 143 million constitutes a large consumer market. Multiplying the total population by the consumer demand yields a sizeable consumer base. Moreover, most of these 143 million people are young. Official data shows that 68% of India's population was in the working age group of 15-64 years by the end of 2022, with a median age of 29.5 years in 2023. The best feature of the young is their willingness to spend. The influence of Western capitalism has shaped the dominant values of Indian youth as 'spend first' and they are optimistic about the future. This "optimism" is reflected in many Indian films, where songs and dances are often inserted to demonstrate the country's optimism and shape the consumer values of young people.

The open-mindedness of young people to consume has contributed significantly to the boom in India's consumer markets, including the electronics market such as smartphones. In fact, not only the electronics market, but also India's e-commerce, fashion, food and beverage, beauty and personal care, and education and training markets have benefited from this wave of young consumers, showing a growing consumer trend.

Another important reason for India's high consumption rate is industrial development, which has enriched Indians and accelerated urbanisation. From 1950 to 2005, India's urban population increased by only 11.7 percentage points. Compared to other countries and regions, India's urbanisation has been relatively slow. This year, the Modi government announced an ambitious plan to invest more than Rs 1 lakh crore in Indian urban infrastructure by 2025. This huge investment, equivalent to Rs 8 trillion, is due to the rapid growth of industry and urbanisation in India in recent years.

As an emerging economy, India has nurtured competitive industries in IT, pharmaceuticals, automobiles, agriculture, textiles and garments, and film. Many Indians have found jobs and their wallets have bulged. More and more people are migrating from the countryside to work in the cities, overloading the existing urban infrastructure. Official data shows that India's urbanisation rate was about 321 TP3T in 2013, increasing to about 36.361 TP3T in 2023. in the last decade, the urbanisation rate has increased by nearly 41 TP3T. although India is still predominantly rural, with only 361 TP3T of the population residing in the cities, the process of urbanisation is still accelerating.

According to official UN projections, India's urban population will reach 675 million by 2035 and surpass the rural population by 2050. Accelerated urbanisation and the influx of people to the cities has naturally led to consumption in various sectors such as apparel, housing and transport. The impact on the furniture industry is most significant. The Indian furniture market is expected to reach $30 billion in 2024 and could reach $39 billion by 2027, according to a study by Statista, an overseas business data platform. This year, Amazon announced that its home, kitchen and outdoor products business in India grew by nearly 251 TP3T, with eco-friendly and green home products standing out. This indicates that urbanisation has brought new consumer drivers to India, a trend that is likely to continue for almost a decade.

Another important reason for India's high consumption rate is the Indian consumer mindset and cultural traditions. Firstly, the savings mindset of young Indians is weakening. India was once a savings-orientated country, with Indian households contributing around 601 TP3T of savings around 2000. However, in the last decade, India's national savings rate has fallen to about 301 TP3T.According to Motilal Oswal report, in December 2023, Indian household debt reached a record high of 401 TP3T of India's GDP.In addition, the net savings rate has fallen to its lowest level in 47 years, at 51 TP3T of GDP.This is mainly due to the poor global environment, high inflation, high unemployment and India's difficulty in developing a secondary sector, which makes it difficult for young people to save.

Currently, Indians spend mainly on real estate and gold, and many young Indians prefer to invest in stocks. With regard to gold, India's national religion, Hinduism, considers gold a symbol of prosperity and wealth. Many Indian deities are depicted wearing gold. Influenced by Hinduism, many Indians buy gold as soon as they have money and even donate it to temples.

The World Gold Council reported on 30 April that in the first quarter of this year, the Central Bank of India increased its gold reserves by 19 tonnes, while the net purchase of gold for the whole of last year was only 16 tonnes. Experts predict that India's gold demand this year could be between 700 and 800 tonnes. It can be said that once Indians have money, they want to buy gold.

The Indian wedding culture is also a major driver of consumption. In our country, weddings for children are often the biggest purchase in the lives of small families. Many parents start saving for their children's weddings at birth, and 20 years later, all the money is spent at once. The situation in India is similar, with one difference: in India, it is the family of the bride who spends the most on the wedding.

According to World Bank 2021 survey data, over 90% of rural Indian households provide a large dowry to the bride's family, seven times the cost of the bride price. The dowry usually includes a house, appliances, furniture, daily necessities, a car, gold jewellery for the bride and groom, and all wedding expenses. This has given a huge boost to spending in certain sectors. Many middle-class Indian families have even gone bankrupt because of dowry for their daughters.

After marriage comes, of course, the birth of a child and Indians place a lot of importance on their children's education, which is a major and expensive expense. According to a 2013 survey by the Federation of Indian Chambers of Commerce, about 65% Indian households spend half of their disposable income on their children's education every month. The average cost of school fees and uniforms per child increased from Rs 35,000 in 2005 to Rs 94,000 in 2013. In addition, more than half of the families said that their children's education from primary to high school graduation costs up to Rs 1.8 to 2 lakh and is increasing every year.

As a result, multinational companies investing in India have been eying this huge market for years.