The comprehensive report by Kotak Mutual Fund, titled "The Great Consumption Shift: How a billion Indians changed what they buy and what it tells us about who is winning," highlights a structural overhaul of the Indian household budget. The traditional Indian consumption story—historically centered on basic necessities and traditional aspirational goods—is rapidly evolving into a bifurcated landscape driven by premiumization, platform-centric digital spends, experiential luxury, and significant domestic leverage. However, this consumption shift is accompanied by notable headwinds, including stagnant mass-market demand, increasing household debt, and considerable capital leakage via financial speculation and digital fraud.
Key Consumption Trends & Structural Changes
1. The Realignment of Wallet Share (Engel’s Law in Action)
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Indian households are spending significantly less on food as a percentage of their total budgets, reallocation capital toward discretionary items.
Collapsing Food Share: The share of food in monthly per-capita expenditures has collapsed from 59% (1999-00) to 46% (2022-23) in rural India, and from 48% to 39% over the same period in urban India.
The Shrinking Thali: Within food categories, the budget allocation for basic staples like cereals dropped from 22% to 5% in rural areas and from 12% to 4% in urban areas.
The New Spending Pillars: Urban households have shifted their savings toward beverages and processed food (+4.2 percentage points), durable goods/mobiles (+3.6 pp), conveyance/automobiles (+3.1 pp), rent (+2.1 pp), and education (+1.5 pp). This directly reflects Engel's Law, which dictates that as households grow wealthier, the proportion of income spent on staples declines.
2. Premiumization and the "Apple Test"
Growth rates between legacy FMCG/aspirational categories and new-age digital/premium platforms show extreme divergence.
Apple vs. HUL: In a striking milestone of premiumization, Apple India’s projected FY26 revenue (₹142,500 crore) is set to nearly double that of Hindustan Unilever Ltd. (₹67,121 crore). Apple has achieved a 5-year CAGR of ~44% serving a minor sliver of affluent households, whereas traditional giant HUL posted a modest 5-year CAGR of ~6.5%.
Exploding Premium Tech: Overall smartphone shipment volume has remained relatively flat, but the premium smartphone market (priced at ₹30,000+) expanded at a 5.9% CAGR between CY20 and CY25, capturing 26% of all sales. Conversely, the mass-market smartphone segment contracted by -1.2%.
Surging Digital Platforms: Massive multi-year revenue and Gross Order Value (GOV) growth are concentrated in digital and platform-led consumption. Notable performers include Meesho (+106% revenue CAGR), quick commerce via Blinkit (+95% GOV growth), hearables (+52% market CAGR), paid OTT subscribers (+40% subscriber CAGR), and food delivery via Swiggy (+43% GOV growth). Traditional categories like refrigerators (+7%), two-wheelers (+8%), and domestic air travel (+9%) have entered mature, low-growth phases.
3. Deepening Income Polarization (K-Shaped Growth)
The report reveals that consumption growth is being structurally sustained by income deepening rather than widening.
Bifurcated Income Cohorts: From FY20 to FY25, the income pool of the Urban Wealthy expanded at an aggressive ~18% CAGR compared to just ~6% CAGR for the Urban Mass. In rural segments, the Rural Wealthy income pool grew at ~10.1% CAGR, outpacing Rural Non-Agricultural Labour at ~7.2% CAGR.
Highly Skewed Discretionary Spend: Discretionary spend is almost exclusively driven by the top decile. The top 10% of urban India spends immense multiples of the national average on luxury and lifestyle segments: Durables (13X), Medical (12X), Out-of-home food (11X), Jewellery (10X), Education (9X), and Conveyance (8X).
The Taxpayer Paradox: Income tax filers grew significantly from 41.5 million in FY15 to 80.8 million in FY25. However, the actual pool of individuals paying a tax liability greater than zero has stagnated at roughly 30 million (~2% of the population). The revenue growth is instead driven by existing taxpayers paying 3x more tax on average—rising from ₹83K in FY13 to ₹2.4L in FY23.
4. Cost of Living and the "EMI Trap"
An underlying stressor for the middle class is the expansion of recurring commitments like debt servicing and rent, which compress real disposable income.
Debt Outpacing Salaries: Over the past seven years, household EMI burdens outpaced aggregate salary growth in five of those years. In FY25, total household EMI obligations spiked by 13.4% YoY against a meager 2.1% YoY growth in total income.
Erosion of Net Financial Savings: This leverage has triggered a sharp contraction in household net financial savings, which collapsed from 11.2% of GDP in 9MFY21 to 5.3% of GDP by 9MFY26.
Urban Rent Inflation: Rent has graduated from a minor line item to a major household constraint, jumping from 4.5% of total urban spend in 1999-00 to 6.6% in 2022-23. Premium urban corridors saw explosive residential rental spikes between 2019 and 2025, including Sarjapur Road in Bengaluru (+67%) and Sector 150 in Noida (+63%).
5. Shift to Experiences and Outward Spends
Affluent consumers are increasingly dedicating a larger portion of their wallets to lifestyle experiences and international markets.
The "Going-Out" Boom: Spending on ticketed live events has surged. The number of ticketed live events in India grew from 19,000 in 2022 to 34,000 in 2024, with Tier-2 cities recording a massive 682% growth in live events in 2024 alone.
Outward Remittance Boom: Capital is moving abroad rapidly under the Liberalised Remittance Scheme (LRS). Foreign travel remittances grew 5.6x over an eight-year period, dominating outward spending to reach ~₹1,45,000 crore in FY26 (up to February). Concurrently, overseas equity and debt investments surged 7.3x over the last three years to ~₹21,000 crore.
6. The Leaking Wallet: Speculation Losses and Cyber Fraud
A highly concerning macroeconomic trend highlighted in the report is that disposable household capital that previously went toward consumption is being completely wiped out by retail derivatives speculation and cybercrime.
The F&O Tragedy: Driven by a massive influx of retail participants, the number of individual Futures & Options (F&O) traders in India grew from 0.67 million in 2014 to 11.15 million in 2024. In FY25 alone, retail individuals suffered net losses of ₹1.05 Lakh Crore, with 91% of traders losing money. The cumulative retail F&O loss from FY22 to FY25 stands at ₹2.87 Lakh Crore, heavily driven by individuals under the age of 30 (who now account for 42% of all F&O traders).
The Cyber Fraud Epidemic: Indian households lost a staggering ₹22,845 crore to cyber criminals in 2024 alone, marking a steep 206% YoY surge from 2023. Cumulatively, over ₹53,000 crore has been drained by digital frauds over the past six years, with fraudulent investment schemes making up 77% of the total losses.
Summary Insight (by AI)
The Kotak Mutual Fund report outlines a core paradigm shift: the Indian wallet has successfully moved from "cereals to data, and from local staples to global brands like Apple". However, this premiumization trend is heavily concentrated within the top affluent decile of urban and rural India (the wealthy cohort growing income at 10–18% CAGR). For the broader mass market, consumption capacity is facing friction from high rent inflation, an escalating EMI-to-salary imbalance, and severe wealth destruction via derivative trading and digital financial scams.
The Impact of AI on the Economy and Markets | May 28, 2026 | Torsten Slok's The Daily Spark | Apollo Global
Apollo: The chart book available here https://www.apollo.com/content/dam/apolloaem/pdf/daily spark/2026/may/28/OddLots ImpactOfAI v2.pdf looks at the impact of AI on the economy and financial markets.