Why betting on India’s affluent consumer over the masses makes sense despite challenges to job creation

Despite recent headwinds, income tax data suggests the number of high earners continues to compound at 15–20% annually.

Even if IT hiring slows and equity wealth fades, the top 40–50 million remain a structural growth engine, he says.

Kunal Vora, Head of India Equity Research at BNP Paribas India, is bullish on the affluent consumption theme, despite growing concerns that the core pillars supporting it — job creation in IT and GCCs, and the wealth effect from equities — may be weakening.

Responding to a question on whether the affluent consumption story may have peaked in The Wealth Formula Podcast by N Mahalakshmi, Vora acknowledged the risks. “I do not completely disagree with this — affluent consumption is right now under some bit of pressure,” he said. But he quickly pointed out that mass consumption faces deeper structural issues that are unlikely to be resolved soon.

In FY25, mass consumption “was a very, very weak year,” Vora said. “Low single-digit revenue growth and almost no EBITDA growth — it cannot go worse from here.” While a modest recovery is possible in FY26, he questioned the sustainability of growth. “Whether it will be strong, whether double digits and whether it is consistent year after year… that is a real question mark.”

He backed that up with a detailed explanation. With the government focused on fiscal consolidation, expenditure growth is capped even if tax revenues rise. “What we have seen in the last many years is prioritisation towards (public) Capex. This year they (government) tried to take care of taxpayers — that benefits only 28 million individuals. That is not really benefiting mass consumption.”

Food inflation may be easing, but Vora pointed out that rising costs have already compressed disposable incomes in rural India. “Subsidies are not going up. MSP increases are low. So income levels are not increasing and the ability to spend gets limited.” Even when incomes stabilise, staples must now compete with new spending categories like telecom and smartphones. “Spending on consumer staples has been consistently well below the nominal GDP growth rate.”

This forms the crux of his preference for companies catering to higher-income households. “We have a basket of 50 stocks aligned with affluent India,” he said. “We looked at stocks which are benefiting from the rising income of the top 40-50 million.”

Despite recent headwinds, income tax data suggests the number of high earners continues to compound at 15–20% annually. “That number may moderate, but it will still be decent in our view,” he added.

In his view, categories exposed to this segment — such as hospitals, diagnostics, asset management, insurance, wealth management, credit cards, and even food delivery — will continue to outgrow the broader economy. “Whatever categories these individuals are consuming will continue to grow at a faster pace compared to the nominal GDP growth rate,” he said.

Even if mass consumption sees a short-term lift from inflation relief or the next pay commission, Vora isn’t convinced of a sustained revival. “Tax rate cuts will benefit only the 28 million. Inflation coming down is positive, but pay commission and tax changes won’t really move the needle for mass consumption.”

As for long-term staples growth, he’s cautious. “A sector which used to comfortably grow at 15%, today there are questions whether it can grow even at 7–8%. And that longevity — which consumption stocks trade on — is coming under pressure.” Vora said the moat around consumer staple companies are getting challenged because of the rise of digital platforms, which break the big barrier around distribution.