With individuals sliding into higher income slab groups, richer Indians are scripting the nation’s consumption surge, data shows.
From 3.8 million in FY12 to 18 million in FY21, individuals in India earning above Rs 5 lakh per annum have surged 5 times, a BNP Paribas analysis of the I-T department's data has shown.
“Income has risen for these households over the last decade, complemented by improved credit availability. Thus their propensity to consume and invest has grown,” BNP Paribas said in a report.
The I-T department data provides insights only till FY21. However, the report suggests that the numbers only grew stronger post that. “While the income tax data is available only till FY21, a pandemic-hit year, we think these numbers should have been even stronger in FY22 and FY23, which were recovery years with strong wage inflation,” it said.
The ratio of India’s high-income households saw a rise in the last decade owing to strength in the services sector including IT services, financial services and others.
“While these households are a very small proportion of India’s households, this number is growing fast and the firms that derive a larger portion of their revenue from these households are well positioned to gain, in our view,” it said.
BNP Paribas has argued that these ‘affluent’ households, which currently form nearly 10 per cent of India, will drive the growth of various industries.
Based on this theme, select stocks may gain, per BNP Paribas, including Maruti Suzuki, Eicher Motors, ITC, Nestle, United Spirits, Titan, PVR INOX, IndiGo, Indian Hotels, Oberoi, Apollo Hospitals, ICICI Lombard, Bharti Airtel, HDFC AMC, Nykaa, Havells, Voltas, and SBI Life.
The report suggests that sectors like automobiles (specifically four-wheelers), financial services, jewellery, hotels, real estate, cigarettes, multiplexes and hospitals have a structural advantage to register faster revenue growth over sectors like FMCG, 2-wheelers, media broadcasting that cater to the mass market.
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One reason why mass market stocks may not see faster revenue growth, in comparison to stocks catering to ‘affluent’ households, is because post the Covid-19 pandemic there has been a divergence in consumption trends. For example, even as 4-wheeler sales have grown steadily in the past decade, 2-wheelers are still in pain.
Driving the change in the consumption trend is also the likely muted growth of those earning below Rs 5 lakh per annum.
The number of taxpayers with a salary above Rs 5 lakh per annum has seen a quicker uptick than those earning below that mark. The number of taxpayers with salaries between Rs 5-10 lakh, Rs 10-20 lakh and Rs 20-50 lakh have grown at a CAGR of 17.6 per cent, 20.8 per cent and 21.6 per cent each between FY12-21.
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At the same time, the number of taxpayers with salaries lower than Rs 5 lakh has grown at a CAGR of 7 per cent.
Furthermore, the number of individuals earning below Rs 5 lakh went down to 72.2 per cent in FY21 from 86.8 per cent in FY12. Hit by the Covid-19 pandemic, individuals earning between Rs 1.5-5 lakh declined, but those earning above Rs 5 lakh kept rising.
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Source Name : Economic Times