An India-based firm recently profiled by this news service sets out more of its investment views about the country, explaining the sectors that it is particularly keen on.

The following article about India comes from Archana Jahagirdar, who is the founder of India-based Rukam Capital. This publication has spoken to Jahagirdar before about the firm’s investment philosophy. We are pleased to share these insights and invite readers to respond. Join in the conversation! Email tom.burroughes@wealthbriefing.com

India is the fifth largest economy in the world and the International Monetary Fund expects India to surpass Germany and take third spot by 2027. India’s growth rate of 8.2 per cent is the highest among major economies, surpassing China’s 4.7 per cent and the global average of 2.7 per cent. And India has demonstrated strong historic growth too, maintaining a gross domestic product growth rate of around 6 per cent per annum over the last four decades, showcasing its resilience and potential for sustained economic expansion.

At the heart of this growth is India’s consumer story which is being driven by an enormous expansion of India’s middle class. The middle class is the fastest-growing major segment of the Indian population in both percentage and absolute terms. It now represents 31 per cent of the population and is expected to be 38 per cent by 2031 and 60 per cent in 2047.

The middle class is growing so fast because incomes are rising. India's GDP per capita has been steadily increasing, from $1,560 in 2014 to $2,730 in 2024 per the IMF, growth of around 6 per cent. It is expected to reach $4,280 by 2029.

So which sectors should investors look at when deciding how to invest in this highly attractive growth? Digital is the obvious place to look at first. By 2025, India is expected to have over 900 million active internet users, with 56 per cent of new users coming from rural areas and 65 per cent being female. And India has nearly a billion smartphone users, making it the second-largest smartphone user base globally.

All of this makes Indian e-commerce firms very relevant. The Indian e-commerce market is projected to reach $400 billion by 2030, growing at a 19 per cent compound annual growth rate. India is expected to have over 500 million online shoppers by 2030, with paid users growing at a 12 per cent CAGR. Since 2014, Indian e-commerce startups have raised $33 billion.

Rising discretionary spending is also driving retail growth. The share of discretionary spending in total consumption has increased from 21 per cent in 1999 to 2000 to 29 per cent in 2022 to 2023, indicating a shift towards higher spending on non-essential goods and services.

In practice what this means is that Indian consumers are willing to pay higher prices for premium and masstige (mass prestige) products, which are growing faster than the mass market segment. The number of affluent Indian households is projected to grow to about 80 million by 2030, accounting for nearly a quarter of the total of 350 million Indian households. This significant increase is driving the demand for premium products and services.

For example, in 2023, India bought 10 million iPhones, highlighting a strong preference for high-end smartphones. Sales of 65-inch+ televisions surged from 5 per cent in 2020 to 12 per cent in 2023. Smart inverter ACs saw a jump from 27 per cent in 2017 to 77 per cent in 2023.

Real estate and automotive sectors also show a significant trend towards premiumisation, with SUV sales constituting 48 per cent of the overall passenger vehicle sales in 2023. The popularity of brands such as Air Jordans, Dyson, and Marshall indicates a growing market for premium lifestyle products.

Another important trend is the increased growth in rural areas, which are witnessing increased consumption, with higher penetration of consumer goods, financial services, and technology. That’s because advancements in agritech are improving productivity and income levels in rural regions, boosting overall spending power.

Finally, there is an increasing number of women entering the workforce, contributing to higher household incomes and changing spending patterns. And more women are becoming entrepreneurs, leading to a rise in female-led businesses.

These trends mean that India’s dynamic consumer growth is likely to continue for decades to come. For international investors who want to access this growth, venture capital investment is an attractive way to get in early, before fast growing Indian consumer firms become public.