Slowdown of the Indian Economy and Changing Consumption Pattern: What Is There for the Automobile Industry?

Abstract

India has enjoyed higher growth during the last two decades. Growth accelerated from an average of 5.8% in the 1990s to 6.9% in the 2000s and was still at 6.6% between 2010 and 2013. The GDP per capita also grew at a faster pace, from 3.8% in the 1990s to 5.3% in the 2000s. At this pace, the GDP per capita doubles every 14 years, which, for the huge size of the Indian population (1.25 billion of individuals in 2013), is an important achievement. As a consequence, the share of absolute poor has declined significantly from 53.6% in 1988 to 24.7% in 2011, and household final consumption expenditure increased 2.6 times from 1990 to 2013. The middle class has expanded in big cities and in smaller ones and enlarged the market for durable consumption goods. It represents less than 10% of the Indian population, or around 70 million people (Meyer and Birdsall, 2012; Dadush and Ali, 2012). This means that the Indian middle class has, for now, a smaller share of the population than in other emerging economies and might expect to expand in the near future, provided that the growth rate remains high.