Power Shift: India & Emerging Asia redefine global consumption trends

The global consumption pools are witnessing a significant shift from regions like North America and Western Europe to India and emerging Asia, reveals a report by McKinsey Global Institute. As per the report, by 2050, India and emerging Asia are expected to make up 30% of global consumption at purchasing-power parity (PPP), a significant rise from only 12% in 1997. This shift highlights the growing role of these regions in the global economy riven by rising incomes, demographic changes, and evolving consumer preferences.

Global consumption patterns are undergoing a significant shift, moving from regions like North America and Western Europe to India and emerging Asia, reveals a McKinsey Global Institute report. According to the report, by 2050, India and emerging Asia are expected to account for 30% of global consumption at purchasing power parity (PPP), a sharp rise from 12% in 1997. In contrast, advanced regions such as North America, Western Europe, and Advanced Asia are projected to contribute only 30%, down from 60% in 1997. Purchasing power parity (PPP) is a popular macroeconomic analysis metric used to compare economic productivity and standards of living between countries.

The report stated, “Consumption pools are shifting from North America and Western Europe to emerging Asia and India…. Developing countries will provide a growing share of global labour supply and of consumption, making their productivity and prosperity vital for global growth.” This shift marks a crucial change in the global economic landscape, driven by rising incomes, changing demographics, and evolving consumer preferences. 

Shifting demographics and the challenges ahead

Demographic trends are playing a pivotal role. There is a significant rise in the global senior population. By 2050, seniors will represent a quarter of global consumption, doubling their share from 1997. Meanwhile, developing countries are expected to contribute to both the global labor supply and global consumption, becoming key drivers of future economic growth.

The report highlights that demography is playing a significant role in shaping consumption patterns as well, with age emerging as a key factor. As millennials and Generation Z consume a larger share of goods and services compared to older generations, India is projected to account for 16% of global consumption by 2050, up from 4% in 1997 and 9% in 2023. This shift is largely driven by the rapidly growing young population in India and other developing nations.

With rising incomes, millennials are opting for more focused and elevated consumption. This is also linked to declining fertility rates, which are influenced by better education and a desire for financial security in family planning. As a result, India’s proportion of the global population, which stood at 23% in 2023, is expected to drop to 17% by 2050 and further decline to 15% by the end of the century.

A notable trend among today’s young population in emerging markets is their growing awareness of financial management. Despite their conscious spending habits, they are willing to invest in aspirational goods and experiences, including luxury items. Research by UBP, a private bank, indicates that this demographic is more brand-conscious, selective, and inclined toward sustainable and eco-friendly consumption.

However, the report also points out the challenges these regions present. Many emerging markets, including India, have complex legal and governance environments and are prone to conflicts, complicating market entry. Moreover, affordability will become an important factor as businesses try to cater to a growing and more diverse consumer base in these regions.

The report also highlights that over the next 25 years, later-wave regions (like India and emerging Asia), will drive more than half of global consumption, fueled by their rapidly growing young populations and rising incomes. This trend emphasizes the need for businesses to innovate and adjust to meet the demands of a transforming global market. Businesses across the globe will need to adapt their strategies to cater to the new consumption patterns and local tastes in these regions. The rising income levels and the changing consumption patterns in India and emerging Asia will necessitate developing products that align with the unique needs of these markets.