India's middle class growing robustly.

India's middle class-already larger than the population of the United States (US)-continues to grow and to attract consumer goods manufacturers and marketers alike. A recent report by the McKinsey Global Institute (MGI) titled, "The Bird of Gold," was reviewed by The Economic Times (Guragon) on May 4, 2007. The review began with the idea that by 2025 India was forecast to be the fifth biggest consumer market in the world (after the US, Japan, China and the United Kingdom.)

The MGI report said that Indian private and public consumption would increase four fold to us$1.5-trillion by 2025.

Additionally, MGI said that over the 20 year period from 2005 to 2025 Indian household income would grow an average of 5.3 percent annually. At an end of May 2007 exchange rate, this would mean household income would grow from us$2,804 in 2005 to us$7,861 in 2025. According to MGI, in Purchasing Power Parity (PPP) terms a household income of us$7,861 in India is the PPP equivalent of approximately us$40,000 in the US.

MGI says that India's middle class "has broadly been defined" as a household income segment between us$4,930 and us$24,651, again at the late May 2007 exchange rate. Sticking with MGI's PPP estimations, this would place India's middle class at between approximately us$25,950 and us$129,742. The lowest "consuming class" income segment, as defined by MGI, is comprised of households earning less than us$2,219, or in PPP terms, us$11,680.

The number of middle class Indian households stands today at 50-million. MGI says this number will grow to 583-million by 2025. "To put that figure into perspective, the middle-class would form the third-largest country by itself in terms of population, and nearly twice the current population of the United States," says the Times.

"This sort of increase in consumer spending," says the Times, "has significant ramifications for consumer product companies. Traditionally, once an economy has more disposable income, it tends to upgrade its purchases. Thus, luxury goods and consumer durable companies have a great opportunity to tap into this consuming class."

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