India Set to Become World's Third Largest Consumer Market by 2026

India is set to become the world's third-largest consumer market by 2026, following the U.S. and China, according to UBS Global Research report. This milestone reflects India's rapid economic growth and burgeoning domestic consumption patterns.

India's consumer market has seen significant expansion over the past decade, nearly doubling household consumption to $2.4 trillion in 2024 at a compound annual growth rate (CAGR) of about 7.9%, which is faster than comparable growth in China, the U.S., and Germany. UBS analysts estimate that India will surpass Germany by 2024 and Japan by 2026 to claim the third position globally in consumer market size. This rapid growth is underpinned by a large and increasing middle class, rising incomes, greater access to credit, and a shift toward more discretionary spending among consumers.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Digital and Financial Inclusion Powering Consumption

The expansion of digital and financial inclusion are key factors fueling India's ascent. These are transforming how consumers spend and access goods and services. Credit card penetration is expected to triple to 296 million by 2030. Digital payment systems like UPI are boosting e-commerce adoption and enabling more seamless consumer engagement with brands, driven by a growing preference for organised retail and experience-led consumption environments.

Growing Affluent Population Boosts Demand

The rising affluent segment also plays a crucial role. As per the data cited in these reports, approximately 40 million Indians (around 4% of those aged 15 and above) belonged to the affluent category in 2023, with annual incomes exceeding $10,000. This group is projected to be about 88 million by 2028, indicating a strong expansion of purchasing power. These demographic and income trends position India to maintain robust consumer demand and consolidate its consumer market growth.

Transformation in Retail Landscape

Apart from increasing consumption, India’s consumer landscape is evolving with businesses adapting to digital commerce, personalised services, and sustainability concerns. Organised retail is growing at about a 10% CAGR and is projected to reach $230 billion by 2030, reflecting the expanding consumer appetite for new retail experiences and omnichannel shopping

Macro-Economic Momentum Supports Consumer Growth

India’s overall economic growth supports this consumer market expansion, with real GDP growth expected to stabilise around 6.4% to 6.5% year-on-year in the fiscal years 2027 to 2028, making it the fastest-growing economy in the Asia Pacific region. This economic momentum both drives and is driven by domestic consumption growth, highlighting the increasing importance of India as a global consumer powerhouse.

In summary, India’s rise to the third-largest consumer market by 2026 is underpinned by strong household consumption growth, the expanding affluent class, digital and financial inclusion, and evolving retail dynamics. This growth signals major shifts in global consumption patterns, with India becoming a key market for businesses worldwide.