India’s middle-class magnet

THE SIZE OF THE MIDDLE CLASS—households with an annual income of at least $4,000—increased from 13.8 million households in 2001-02 to 46.7 million households in 2009-10, according to the National Council of Applied Economic Research. The latter figure translates to about 200 million people. With the economy projected to grow 8% annually, and the middle class set to triple in 15 years, the most important characteristic of the market is the high potential of domestic demand, which is expected to grow at a compounded rate of 9.2% year on year between 2010 and 2030. This is encouraging news, given that one of China’s main attractions for investors, according to a previous Ernst & Young survey, is the size of its market.

India’s economy is increasingly driven by private consumption. It accounts for 60% of GDP (compared with 35% in China), so it has not been too badly hit by the global downturn. FDI in India fell only 19% in 2008-09 (compared with 89% in China). In 2007, the demand for mid-range cars in India surged by 33%, and car sales are expected to double to 3 million a year by 2015. The consumer market is likely to become the world’s fifth largest by 2015.