“India is becoming a spender-investor economy,” says Som Kapoor of EY

India is the fastest-growing economy in the world, and its domestic wealth is growing. India’s billionaires have now shot up over 200 and the country is currently ranked at number 3 globally when it comes to billionaires and lags only behind the USA (813) and China (406). 

The combined wealth of Indian billionaires is approaching a trillion dollars with a record total of $954 billion and it is up by 41% from $675 billion in 2023. Additionally, 25 new Indians have debuted on the Forbes Billionaire list in 2024. Indians now have high affordability, a factor that is driving luxury consumption in the country. Som Kapoor, Consulting Partner, Ernst & Young throws light in The Rise of The Rich Indian conversations with Republic Business. 

Edited Excerpts:

Republic Business: With India poised to become a $5 trillion economy, there’s already a strong growth in the number of high net-worth Individuals. A high spending power means that Indians have greater affordability of luxury and high-end goods? 

Som Kapoor: The last 10-15 years have been absolutely brilliant for us. I mean, just from a numbers perspective, India has approximately 8,00,000 millionaires. You know, people who make about 8.3 crores of net worth and over about 12,000 Ultra HNIs in the country, which is a decent number already. You know, in 2023, we sold about $5 billion worth of luxury goods. You know, it's expected to touch 8 billion now. Some people are talking in terms of 85 billion, 90 billion by 2030. 

So, you know, in terms of both the last couple of years and the anticipated future, luxury is something that is anticipated to do extremely well in the country. You know, I mean, if you were to just look at the way our GDP has grown and is anticipated to grow, the GNI is the way it has anticipated to grow. The way we are spending money, there's a definite shift of how we were saving money to how we're investing money now. All of that is contributing towards decent growth in the luxury segment of the market.

Republic Business: So India has traditionally been a saving economy. Do you think Indians are transforming from a saver to a spender's economy?

Som Kapoor: Well, absolutely, great question. Yes, we are moving from just being a savings economy to being, I would say, investment oblique the spending economy. You know, as we've started to make more money, as the GDP has increased, we have more uh disposable income available as well for spending. I mean, a key start over there to my mind, which always uh pays out is the user is the credit card user in the country. I mean, if you were to look at uh you know, we've got about a 26 increase year on year on credit card usage. 

You know, the more people are, so that that's a very key indicator to my mind on how people are spending more money now versus so the consumption part of the economy is starting to do very well and that is something that, you know, is a key metric I generally try and track to figure out if they're spending more money. Also, the way we are saving earlier versus the way we are investing now is changing. I mean, there are so many facts that keep changing how we were an FD-based savings country and now we're moving towards equity markets. 

Lots and lots of people putting money through mutual funds into both equity and tech instruments. So, all of that is looking forward in a direction that we are moving towards a more consumable base. We're consuming more, and hence we're investing more kind of a shape. And financial literacy is really helping us as well. I think there is a bunch more financial literacy that has happened, which is helping us move from just traditional savings instruments to maybe new investment instruments.

Republic Business: So as the pocket size increases, what people want to own also is getting, people want to own better things, bigger things. What is your sentiment about the luxury market, the luxury automobile market in India right now? Because I believe SUVs are now the flavour of the season. People want to buy bigger cars. What is your observation?

Som Kapoor: Well, great point. The luxury auto market is growing. We've touched our best numbers ever. The question that everybody is trying to answer is, say we're at about 40,000 cars, 40,000 luxury cars a year, when do we hit 100,000? You know, are we doubling the book by 2030? Are we reaching 100,000 by 2032? But that is the anticipated speed of growth that we are looking at from a luxury car market. You know, SUVs are the flavour of the season, but I think SUVs is important. But, you know, in India, India is going to move towards long-wheelbase cars, right? 

If you look at most of the new launches, you know, a lot of people are trying to put in money behind long wheelbases, traditionally longer cars, because that is what people anticipate luxury with to a certain extent. So that is a key driving factor in the luxury car market also. And I think the people who are consuming or buying these cars, they're used to a certain lifestyle now. they're happy to pay, you know, 300 rupees for a cup of coffee at Starbucks. They want to buy a Dyson air wrap for their uh consumption they want to go ahead and make sure they stay at the car hotel uh you know so you know it's not just about buying the luxury car, but it's the lifestyle that is changing quite drastically. And I think the luxury car is a part of that lifestyle which is changing. 

So, you don't have to just uh absorb that what is the growth in the luxury car market, but growth in the, you know, in the associated enabler markets as well is something that is of key interest to me. And I'm seeing a fair amount of significant growth in the luxury market overall to that extent. I would just think of its Ethos, you know, the watch company is growing at 33 percent, the Taj group posted a 37 percent jump in profits. All those numbers, all of those trend indicators are in the same direction. Yeah, even as we speak, we know that Tesla is all set to enter the Indian market.

Republic Business: EVs are making a big splash already. But even then, luxury cars are going to stay, and people are getting a taste of the high life, as we can define it. So, what are people looking for when they want to spend on these big-ticket vehicles?

Som Kapoor: I think different kinds of consumers want different kinds of what they want. You have your flamboyant air segment, somebody for whom the luxury car market is something that he's seen through when he's growing up. He's looking at the driving experience, the experience that comes with the car, the latest technology in the car. 

There is somebody who is a rising achiever. know maybe he's a professional maybe he's a first generation startup guy uh he's made his money but for him you know it's still the uh you know typical Indian value for money concept as well even though he's buying a luxury car he still wants to maintain that whole concept of value for money it's an aspirational buy for him so the badge is more important than what typically the product is it's the badge value of the car that is very important for him uh you haven't you have a segment for the patient aspire right somebody who's got it through a lot of hard work uh who's put in the hard yards and you know 10 15 years of work and then he's buying his first luxury car. 

He's looking at, you know, he compares that if I'm buying a luxury car, what is the latest tech I'm getting? What are the benefits out of that that I'm getting uh how important are those, you know it's a way of collecting badges for him as well to say that, you know, what my car has these many numbers of tech features in it? And hence, I paid the extra money. So different segments of the consumer have a very different aspirational level when it comes to buying a luxury car.

Republic Business: Over the next decade, how much penetration will the luxury automobile market make into the overall automobile segment in India?

Som Kapoor: Well, I think, as I started by saying, the critical number for everybody is the 100,000 number. When do we get the 200,000 number? In terms of luxury car sales. Do we hit it in 2031? Do we hit it in 2032? And I think we will continue to be a very small, luxury car market will continue to be a very small percentage of the total car market. say if the total car market tends to reach about six million six and a half million and the hundred thousand number is reached it's still a very small number from a total car market perspective but just the growth in the luxury car market is anticipated to be higher than the mass car market that's just it could be a base effect as well because currently, the luxury car market is very small unlike China. I don't think we're going to be hitting that kind of number in India. But still, we will go ahead and hit decent numbers to get to the 100,000-car market in the next year or so.