India’s consumption pattern is witnessing a structural shift, with affluent households increasingly driving demand for premium products, digital services and lifestyle-led spending, according to a report by Kotak Mahindra Mutual Fund.

The report, titled The Great Consumption Shift, said household spending in India has gradually moved away from essentials towards discretionary categories such as smartphones, automobiles, eating out and entertainment.

It noted that the share of food in monthly household expenditure has declined significantly over the last two decades across both rural and urban India. Rural households spent 59 per cent of their monthly expenditure on food in 1999-00, which fell to 46 per cent in 2022-23. In urban India, the share declined from 48 per cent to 39 per cent during the same period.

The report said categories such as mobile phones, automobiles and rent have gained a larger share of household spending, reflecting changing aspirations and consumption priorities.

“Food is out, everything else is in,” the report said, adding that spending on mobiles, automobiles, durables, rent and education has emerged as a key component of urban household budgets.

The report also highlighted rising premiumisation in India’s smartphone market. It said sales of premium smartphones priced above Rs 30,000 grew steadily between CY20 and CY25, while the mass-market segment contracted during the period.

According to the report, the share of premium smartphones in total handset sales rose from 20 per cent to 26 per cent over the five-year period despite overall smartphone volumes remaining broadly flat.

Premiumisation Gains Pace
The report said discretionary spending is increasingly concentrated among affluent urban households. Categories such as jewellery, consumer durables, out-of-home food and education are largely being driven by top-income consumers, it added.

It also pointed to widening income divergence between affluent and mass-market consumers. The report estimated that income growth among wealthy urban households rose at around 18 per cent CAGR between FY20 and FY25, compared with nearly 6 per cent CAGR for the broader urban population.

The changing income profile is reshaping demand across sectors, the report said. Traditional consumption segments such as FMCG products, refrigerators and entry-level two-wheelers are witnessing slower growth, while premium electronics, OTT subscriptions, hearables, quick commerce and experience-led spending are expanding at a faster pace.

The report further noted that Apple’s India revenue is projected to surpass that of Hindustan Unilever in FY26 despite catering to a relatively small consumer base.

Summarising the trend, the report said the Indian consumer wallet has steadily evolved from spending on staples towards data, digital services and premium consumption categories.