Premium spending is soaring, while mass consumption stays uneven: Kotak MF report

India's consumption story is increasingly being driven by affluent households spending more on premium products, experiences and digital lifestyles, even as mass consumption remains patchy and income growth uneven, according to a report by Kotak Mahindra Mutual Fund.

India's consumption story is increasingly being driven by affluent households spending more on premium products, experiences and digital lifestyles, even as mass consumption remains patchy and income growth uneven, according to a report by Kotak Mahindra Mutual Fund. The report, titled "The Great Consumption Shift", said the Indian consumer wallet has undergone a structural transformation over the past two decades, moving away from staples towards discretionary and premium categories.

"Food is out, everything else is in," the report said, noting that the "share of food in monthly per-capita spend has collapsed in both rural and urban India, replaced by automobiles, mobile phones, eating out & rent." The report highlighted that 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 food share declined from 48 per cent to 39 per cent over the same period.

At the same time, categories such as Mobiles saw a 3.6 percentage point rise in wallet share, while Automobiles increased by 3.1 percentage points and rent by 2.1 percentage points. The report said the shift reflects rising aspirations and changing priorities of Indian households. "Mobile, Automobiles, Durables, Rent and Education are the new pillars of Urban Household spending," it said.

One of the clearest indicators of premiumisation, according to the report, is the sharp rise in high-end smartphone sales. "Premium phones grew at a 5.9 per cent CAGR - while the mass-market segment shrank at -1.2 per cent (CY20-25)," it noted. The share of premium smartphones priced above Rs 30,000 increased from 20 per cent to 26 per cent of total phones sold in India between CY20 and CY25, despite overall smartphone unit sales remaining broadly flat. "Same number of phones. Very different wallets," the report observed.

The report also underlined how premium consumption is increasingly concentrated among top-income urban consumers. "Discretionary Categories - Durables, Jewellery, Out-of-Home Food, Education - are Almost Entirely Top-Decile Stories," it said.

According to the report, urban top-10 per cent households spend multiples of the national average across categories such as jewellery, education, out-of-home food and durables. The divergence is also visible in income growth patterns. "Income growth deepened. It didn't widen," the report said.

It added that "Urban Wealthy: ~18% CAGR vs Urban Mass: ~6% CAGR" in income pool growth between FY20 and FY25, showing that affluent cohorts are pulling ahead much faster than the broader population. The report argued that India is now witnessing "the same wallet, two very different growth stories."

While old-economy consumption categories such as FMCG, refrigerators and two-wheelers are slowing, newer categories like Apple products, OTT subscriptions, hearables, quick commerce and premium experiences are accelerating rapidly. Apple India's growth particularly stood out in the report. "In FY26, Apple's India revenue is projected to 2x rival HUL's - despite serving only a sliver of households," it said.

The report summed up the broader shift by stating: "The Indian wallet has moved from cereal to data to OTT to mobiles." (ANI)