Only one out of 10 Indians has money for spending on non-essential items

A new study has found that around 30 million people fall into the 'emerging' or 'aspirant' consumer category who have only recently begun spending more but remain cautious in their financial choices

A vast majority of Indians — nearly 1 billion, or 90 per cent of the population — lack the financial flexibility for discretionary spending, according to a recent study by venture capital firm Blume Ventures.

 

The Indus Valley Annual Report 2025, published by venture capital firm Blume Ventures, highlights that India’s top 10 per cent, roughly equal to Mexico’s population of 130-140 million, plays a dominant role in driving consumption and economic growth.

 

Despite the country’s expanding economy, this affluent segment is not broadening but consolidating its wealth. Additionally, around 30 million people fall into the ‘emerging’ or ‘aspirant’ consumer category. These individuals have only recently begun spending more but remain cautious in their financial choices.

 

 

Policy measures and widening inequality

Despite India’s strong consumption growth compared to major economies, it still lags behind China by over a decade, the Blume report mentioned. In 2023, India’s per capita consumption stood at $1,493 — lower than China’s $1,597 in 2010.

 

India’s economy is at a critical juncture, with rising consumption, a booming stock market, and a thriving startup ecosystem, but also needs deep-rooted structural challenges, according to the report. It highlighted a widening wealth gap, declining savings, and over-reliance on informal investments like gold.

 

Consumption dominates, but disparities persist 

Consumer spending accounts for nearly 60 per cent of India’s GDP, the report stated. However, per capita consumption remains significantly lower than in comparable economies. While the wealthiest 10 per cent, referred to as ‘India1’, drive two-thirds of discretionary spending, lower-income groups struggle with underconsumption, particularly in financial services, automobiles, and daily essentials.

 

The report noted that India’s consuming class is not expanding significantly in numbers. Instead, the wealthy are getting richer, accelerating a trend of ‘premiumisation’, where brands focus on high-end products rather than mass-market offerings. This is reflected in the growing demand for luxury housing, premium smartphones, and high-priced entertainment experiences, including international concerts.

 

Between gold and debt: The savings dilemma 

The report identified gold as a preferred investment due to weaknesses in India’s land and contract enforcement systems. With 47 million land-related cases pending in courts, real estate is often unreliable as collateral, making gold a more liquid and secure asset.

 

However, this preference for gold, coupled with declining financial savings, has led to rising household debt, the report warned. Personal loans have surged, driven by easy credit availability from fintech and non-banking financial companies. The RBI has raised interest rates to 6.5 per cent to control borrowing, yet consumer credit remains at record levels.

 

Startup growth and venture capital trends 

India’s startup ecosystem, referred to in the report as ‘Indus Valley’, continues to expand. The country now has 117 unicorns, making it the third-largest unicorn hub globally. However, the report pointed out that only 91 of these unicorns are genuinely valued at over $1 billion, raising concerns about inflated valuations.

 

Venture capital funding, which peaked in 2021, has declined sharply, with fewer large late-stage deals, signalling increased investor caution. However, the report highlighted a trend of ‘reverse-flipping’, where startups originally incorporated abroad are shifting back to India for tax benefits and IPO opportunities.

 

The government’s Digital Public Infrastructure (DPI) — including Aadhaar, UPI, and direct benefit transfers (DBTs) — has played a crucial role in boosting financial inclusion. The report noted that UPI now processes 83 per cent of digital transactions, significantly reducing inefficiencies in welfare distribution.

 

Stock market boom and investor risks

 

India has emerged as the world’s largest derivatives market, largely fuelled by retail investors engaging in high-risk options trading, the report stated. However, it raised concerns that 91 per cent of retail investors in derivatives are losing money. The report highlighted that the Securities and Exchange Board of India (Sebi) has tightened regulations. But household financial losses in derivatives trading reached Rs 410 billion ( around $5 billion) last year, leading to fears of a potential market correction.