Consumer spending in emerging market powerhouses China and India is expected to triple by 2020 to a combined $10 trillion a year, potentially helping to boost economic growth and corporate profits in the developed world, researchers said on Tuesday.
The study by Boston Consulting Group (BCG) is based on a survey of 24,000 consumers as well as interviews with business leaders. The business strategy consultancy predicts consumers in China and India will spend a combined total of $64 trillion on goods and services in the decade leading up to 2020.
Annual spending on consumer goods will be three times the level spent in 2010, according to "The $10 Trillion Prize: Captivating the Newly Affluent in China and India".
"We are at a turning point in history where relative wealth will shift from the West to China and India, but absolute wealth, including in the West, should increase," said Michael J. Silverstein, a senior partner at BCG and the book's co-author.
Some of the enthusiasm for India, China and other emerging markets has dimmed in recent months due to slowing economic growth, weak progress with structural reforms and political risks. Emerging equities have also not performed as well in recent years as their developed peers.
But the book's authors played down these worries, saying India and China were experiencing the inevitable volatility in emerging economies.
The middle class in the two countries is expected to reach 1 billion by 2020, BCG said, noting that in India, the proportion of middle-class people is expected to grow to 45 percent in 2020 from 28 percent in 2010.
BCG said Western companies need to win over the growing middle class of the two countries via long-term strategies adapted to the future spending habits of these new consumers.
It named Kraft, Yum! Brands, PepsiCo, Gucci, LVMH, BMW, and Pernod Ricard as companies that have deployed successful strategies in these countries.