In 2023, India became the world’s most populated country, in contrast to China’s dropping birth rate. This leads to a comparison of their consumption habits and geopolitical ramifications.
Consumer size in India and China
Private Final Consumption Expenditure (PFCE):
- In terms of Private Final Consumption Expenditure (PFCE), India spends more than 58% of its GDP on consumption, whereas China spends only 38%.
- Final consumption, including government expenditure, accounts for 68% of Indian GDP and 53% of Chinese GDP.
- Despite China’s bigger economy, its PFCE is only around 3.5 times India’s, demonstrating that consumption contributes more to India’s GDP.
Expenditure by Categories:
- India’s consumer expenditure is characterised by increasing spending on food, clothes, footwear, and transportation, as expected in a developing economy.
- In contrast, China’s consumption basket reflects a highly developed economy, with increased expenditure on housing, white goods, entertainment, education, and health care.
- Despite accounting for one-fifth of China’s economy, India spends around half as much on food, transportation, clothes, and footwear as China.
- Real growth rates for particular consumption categories in India frequently beat nominal growth rates in China.
Conclusion:
India’s higher PFCE as a proportion of GDP suggests a larger dependence on consumption-driven growth than China.The proportion of consumption spending in India and China demonstrates disparities in market maturity and consumer behaviour.Despite China’s larger economy, India’s consumer spending is comparatively high, signalling the possibility of further expansion and economic development.
Source: https://www.thehindu.com/business/Economy/india-china-consumption-comparison/article68197627.ece#:~:text=While%20PFCE%20contributes%20more%20than,India%20and%2053%25%20for%20China.