PayKun Payment Gateway: Indians, why are they more daring than Chinese to spend money?

At present, China's economic development is facing a remarkable situation: insufficient consumption. Consumption, as one of the main drivers of the country's economic growth, has in recent years been encouraging the cultural and tourism industries in all regions to increase consumption in order to stimulate the national economy.

On the consumption side, India is doing well statistically. In terms of consumption as a share of GDP, India's final consumption expenditure by residents in 2023 was 601 TP3T of GDP, which is lower than the US (821 TP3T) and Japan (771 TP3T) but significantly higher than the country (531 TP3T).

This difference is more visualised in the chart below.

The gap between our country and the developed world is understandable, but why is India's consumption rate higher than ours? Don't we have the impression that India is a very poor country? How can its people consume so much?

In our impression, India has always been a poor country. According to the criteria for extreme poverty 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 considered extremely poor. In India today, there are still 83 million people living on less than Rs 15 a day, which means their monthly income is less than Rs 450. This figure is shocking because it means that one out of every 17 people you meet in India 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.

However, India is a country of contradictions. Despite its poverty, its people are willing to consume. For example, Indians have one of the most unacceptable peculiar habits in the world - drinking cow's urine. They mix cow urine, dung and spices to make a drink that is sold in the market.

Cow urine drink in India

The price of this cow urine drink ranges from a few dollars to $80, which is even higher than the daily cost of living for the average Indian. However, in this case, this cow urine drink sells millions of servings every year in India, with a market size of billions of RMB, demonstrating the impressive spending power of Indians.

Another little habit of Indians is that they like to make phone calls. Many Chinese abroad have noticed that Indians are always with their mobile phones, calling their families whenever they can.

Indians love to talk on the phone.

Unlike in our country where people prefer texting to calling, Indians call if they have something to say. Even when responding to questions from netizens on public social media platforms, they ask for phone numbers for private calls. This habit may explain why Indians are interested in the latest smartphones. Data shows that around 50% Indians plan to replace their mobile phones within a year.

Over the past nine years, the Indian smartphone market has grown 20 times. in the first half of 2024, the Indian smartphone market shipped 69 million units, a year-on-year growth of 7.21 TP3T. as a result, major global smartphone makers such as apple, xiaomi, samsung, vivo, and oppo are competing fiercely in the indian market, all hoping to get a slice of this fertile ground.

As one of the fastest growing economies in the world, the rapid growth of India's GDP in recent years has relied heavily on the rapid growth of private consumption by its residents. In March this year, the Indian statistics department released a survey of household consumption every five years.

According to the survey data, the per capita monthly consumption in India is Rs. 4,794 or approximately Rs. 400 in 2023, growing at a CAGR of 8.91 TP3T as compared to the 2013 survey results.

Looking at the breakdown of India's GDP, private consumption has the highest and fastest growing share, growing from 551 TP3T of GDP in 2010 to 591 TP3T in 2023, with a year-on-year increasing trend.

Some of you may be wondering what is the reason for the high spending of Indians. The most fundamental reason is India's huge population. Many people who visit India are first struck by the sheer size of the population there. The airports are crowded and the streets are busy.In April 2023, India's population reached 143 million, surpassing our country as the most populous country in the world.

The huge consumer market consisting of the various needs of 143 million people, multiplied by the total population of India, is a considerable number. Moreover, most of these 143 million people are young. Official data shows that 68% of India's population was of working age (15-64 years) at the end of 2022, while the average age of India's population is relatively young at 29.5 years in 2023.

Young people are known for their willingness to spend. The influence of Western capitalism has shaped the dominant values of Indian youth to "consume first" and to be optimistic about the future. This "optimist" spirit is reflected in many Indian films, where songs and dances are often inserted to demonstrate the country's optimism, which in turn shapes the consumer values of youth.

The open-mindedness of young people to spend has contributed significantly to the boom in Indian consumer markets, such as the electronics market mentioned earlier. 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 the youth population with increasing consumption.

Another important reason why Indians are able to consume is the growth of industry, which has enriched the people and accelerated urbanisation. From 1950 to 2005, in a period of 55 years, the proportion of urban population in India increased by only 11.7 percentage points. The process of urbanisation in India has been relatively slow as compared to other countries and regions.

This year, the Modi government announced an ambitious plan to invest more than Rs 1,000 crore (more than Rs 8,000 crore) by 2025 in infrastructure development in Indian cities. This huge amount of money is largely due to the rapid growth of Indian industry and urbanisation in recent years. As an emerging economy, India has nurtured competitive IT, pharmaceutical, automobile, agriculture, textile and garment, and film industries that have provided employment opportunities and filled the pockets of many Indian people.

More and more people are migrating from rural areas to cities for work and the original urban infrastructure is no longer able to support the influx of new residents. Official data shows that India's urbanisation rate was around 321 TP3T in 2013 and 36.361 TP3T in 2023.In the last decade, the urbanisation rate has increased by almost 41 TP3T.

The pace of urbanisation in India is accelerating despite the fact that the country is still predominantly rural with only 36% of the population living in cities. 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 residents to cities has naturally boosted consumption in various sectors, with the most significant impact on the furniture industry. The Indian furniture market is expected to reach $30 billion by 2024 and $39 billion by 2027, according to a study by Statista, an overseas business data platform. This year, Amazon announced that sales in the home, kitchen and outdoor product categories on its India website grew by nearly 251 TP3T, with eco-friendly and green home products showing strong growth. This indicates that urbanisation has brought new consumer drivers to India, a trend that is likely to continue for almost a decade to come.

Another important reason for India's high rate of consumption is the consumption mindset and practices of Indians. Firstly, the savings mindset of young Indians is weakening. India used to be a savings oriented country, with Indian households contributing about 601 TP3T of savings around 2000. However, in the last decade, India's national savings rate has declined 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 declined 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 in India and the difficulty in developing the secondary sector, which makes it difficult for young people to save money. At present, Indians mainly spend their money on real estate and gold, and many young people prefer to invest in stocks. Taking gold as an example, India's state religion, Hinduism, believes that gold is a symbol of prosperity and wealth, and many Indian gods are depicted as wearing gold. Under the influence of Hinduism, many Indians buy gold as soon as they have money and even donate it to temples.

Indians queue up to buy gold

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 Central Bank purchased only 16 tonnes of gold in the whole of last year. Professionals 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 will want to buy gold.

Another factor that drives spending in India is the Indian wedding culture. It is a well-known fact that in our country, marriage is probably the biggest expense for the family. Many parents start saving for their children's wedding expenses from the time they are born and after about 20 years, the money is spent all at once. In fact, India is similar but slightly different because in India, the bride's family is the biggest spender.

According to World Bank 2021 survey data, more than 90% rural households in India provide a large dowry to the bride, which costs seven times more than the groom gift. The dowry usually includes a house, electrical appliances, furniture, daily necessities, a car, gold jewellery for the bride and groom and all wedding expenses. This has contributed significantly to the spending boom in certain sectors.

Even some middle-class Indian families can be impoverished by giving their daughters in marriage. After marriage comes, of course, the birth of a child, and Indians place great importance on investing in their children's education, which is a major and expensive expense. According to a 2013 survey by the Federation of Indian Chambers of Commerce (FICCI), around 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 households said that the cost of their children's education from primary to high school graduation was between Rs 1.8 lakh and Rs 2 lakh and it is increasing every year.

As a result, multinationals investing in India have been coveting this pie for years.