ICE - Ekram Attai

1. WELCOME

2. India’sConsumer
Evolution
- EKRAM ATTAI

3. contents
Introduction
Importance
Application
Case relevance
SWOT Analysis

4. Introduction
OF case
India's Consumer Evolution
India is poised for a dramatic expansion of
domestic consumption that will make the
country one of the largest consumer markets in
the world. However, many voices in the country
have expressed concern that this explosion of
spending power will compromise India's ability
to invest for the future.

5. Introduction
OF case
 New research by the McKinsey Global Institute (MGI)
finds that these fears are misplaced. If overall economic growth
remains on a long-term path of 7 to 8 percent, as most economists
expect, then consumption will soar.

6. Introduction
OF case
 The short aim: we believe that India has now entered a
virtuous long-term cycle in which rising incomes lead to increasing
consumption, which, in turn, creates more business
opportunities and employment, further fuelling GDP and income
growth. Our results show that a significant expansion in
consumption is not dependent on an equally significant decline in
savings.There are three major factors driving increased
consumption, by far the most important being rising
incomes, which we estimate will account for 80 percent of total
growth over the next two decades.The second driver will be
population growth, which we find will account for a further 16
percent of the overall rise in consumption.The third factor
will be savings but developments on this front will play a relatively
minor role.

7. Introduction
OF case
 We expect India's household savings rate to peak and gradually
decline from its current level of 28 percent of disposable income to
22 percent in 2025 as India's demographics become more
youthful.

8. Question and
answer to it
 Question:
Compare savings VS
consumption scene in India.

9. Answer
If overall economic growth remains on a long-term path of 7 to 8
percent, as most economists expect, then consumption will soar.
.We estimate that real consumption will grow from17 trillion Indian
rupees today to 70 trillion Indian rupees by 2025, a fourfold increase.
This will vault India into the premier league among the world's
consumer markets.

10. Answer
 we believe that India has now entered a virtuous long-term cycle
in which rising incomes lead to increasing consumption, which, in
turn, creates more business opportunities and employment,
further fuelling GDP and income growth

11. Answer  Our results show that a significant expansion in consumption is
not dependent on an equally significant decline in savings.

12. REASONS FOR
INCREASE IN
CONSUPTIONS
ANDSAVING
 rising incomes
 population growth
 savings

13. Answer
 The primary driver of India's growth as a
consumer economy will thus be increasing
incomes.
 . Our analysis shows that average real
household disposable income is set to grow
from 113,744 Indian rupees in 2005 to 318,896
Indian rupees by 2025, a compound annual
growth rate of 5.3 per cent.

14. Answer
 We are optimistic on this front because of the substantial scope
for Indian businesses to increase their productivity, the growing
openness and competitiveness of the Indian economy, and
favorable demographic trends.

15. Answer
By 2025, we see the deprived segment shrinking even
further to only 22 percent of the total population. Rising incomes
will also create a sizeable and largely urban middle class.We
define the middle class as spanning real annual household
disposable incomes of 200,000 Indian rupees to 1,000,000 Indian
rupees.

16. SWOT
ANALYSIS
 STRENGHTS
 WEAKNESSES
 OPPORTUNITIES
 THREATS

17. SWOT
ANALYSIS
STRENGHTS
POPULTAIONGROWTH IMPACT
RISINGOF INCOMES IMPACT
MORE PRODUCTION IMPACT
INVESTMENT
MORE CONSUMPTION LEADTO INCREASE ECONOMY

18. SWOT
ANALYSIS
WEAKNESSES
MORE CONSUMPTION LEADTO LESS SAVING
MORE SAVING LEADTO LESSCONSUMPTION
DECREASE IN INCOMES
DECREASE IN POPULATION

19. SWOT
ANALYSIS
OPPORTUINITIES
 Non-income determinants of consumption
 Population
 Wealth

20. SWOT
ANALYSIS
THREATS
role of government
IN CONSUMPTION AND INVESTMENT
 Dissaving
 Negative saving; a situation in which spending exceeds income
 Dissaving can occur when a household is able to borrow or use up existing
assets.
 Consumption Function
 The relationship between amount consumed and
disposable income
 A consumption function tells us how much people plan to
consume at various levels of disposable income.

21. RELEVANCE
OFCASE
STUDY
 Consumption
 Spending on new goods and services out of a
household’s current income
 Whatever is not consumed is saved.
 Consumption includes such things as buying food
and going to a concert.

22. RELEVANCE
OFCASE
STUDY
Saving
The act of not consuming all of one’s current income
Whatever is not consumed is, by definition, saved.
Saving is an action measured over time (a flow).
Savings are a stock, an accumulation resulting from
the act of saving in the past.

23. RELEVANCE
OFCASE
STUDY
Dissaving
Negative saving; a situation in which spending
exceeds income
Some Simplifying Assumptions
in a Keynesian Model
 Consumption plus saving equals disposable income.
 Saving equals disposable income minus consumption.

24. Some
Simplifying
Assumptions
in a Keynesian
Model
 ConsumptionGoods
 Goods bought by households to use up, such as food and movies
 CapitalGoods
 Producer durables; nonconsumable goods that firms use to make
other goods

25. Some
Simplifying
Assumptions
in a Keynesian
Model
 Investment
 Spending by businesses on things such
as machines and buildings, which can
be used to produce goods and services in the future
 The investment part of real GDP is the portion that will be used in
the process of producing goods in the future.

26. Determinants
of Planned
Consumption
and Planned
Saving
 In the classical model, the supply of saving was
determined by the rate
of interest.
 The higher the rate, the more people wanted to
save, the less they wanted
to consume.
 Keynes argued that real saving and consumption
decisions depend primarily on a household’s real
disposable income.

27. THANKYOU MAA’M