India Set To Account For 16% Of Global Consumption By 2050: McKinsey Report

India wil likely account for 16% of global consumption at purchasing power parity (PPP) by 2050, a significant rise from 4% in 1997 and 9% in 2023, according to a McKinsey Global Institute report titled ‘Dependency and Depopulation: Confronting the Consequences of a New Demographic Reality,’ released recently.

Only North America, with a projected 17% share, will surpass India in 2050.

PPP adjusts for price differences between countries, offering a more accurate comparison of currency values.

Regional Shifts In Global Consumption

The report highlights that in the next 25 years, later-wave regions like emerging Asia, Latin America, the Caribbean, West Asia, North Africa, India, and Sub-Saharan Africa will contribute more than half of global consumption, driven by rising incomes and young populations.

In contrast, advanced regions, including North America, Greater China, Western Europe, and advanced Asia, are projected to see their share of global consumption drop from 60% in 1997 to 30% in 2050.

This shift has significant implications. As income and consumption grow in markets like India, businesses must adapt their products and services to meet evolving local preferences.

The report also notes a demographic shift. By 2050, only 26% of the global population will reside in first-wave regions like Western Europe and North America, down from 42% in 1997, with the remainder living in later-wave regions and Sub-Saharan Africa.

These regions will account for two-thirds of global labor hours by 2050, reflecting a major shift in workforce distribution.

The research sheds light on India’s demographic trends. Currently, India’s support ratio-the number of working-age individuals per person aged 65 or older-is 9.8.

However, this is projected to halve by 2050 and decline further to 1.9 by 2100, mirroring Japan’s current ratio.

Global Population Declining Share

India’s share of the world population, which stood at 23% in 2023, is likely to decline to 17% by 2050 and further to 15% by 2100.

By 2100, India’s population is to reach 1.505 billion, a modest 5% increase from 2023 levels.

This follows the country’s fertility rate dropping below the replacement rate in 2019.

Between 1997 and 2023, India’s demographic dividend-an increase in GDP per capita due to a higher working population-added an average of 0.7% to GDP per capita growth annually.

However, labor intensity declined by 1.1% over the same period, offsetting the advantages of a larger workforce.

By 2050, the aging population will likely contribute just 0.2% to income growth.

The report emphasizes that increasing women’s participation in the workforce could significantly boost economic growth.

A 10-percentage-point rise in women’s labor force participation could increase India’s GDP per capita by 4-5%.

Also Read: Indian CEOs Lead In Economic Confidence & Investment Plans: PwC Survey