India is entering a new phase where consumer spending is fueling growth, says Sandy Franks in Taipan Daily. In the past seven years, sales of color TVs in India have jumped 1,700%. Sales of cellphones have soared by 10,400%. The outlook for India’s looking rosy, says Sandy. Unlike other Asian countries which depend on exports for prosperity, India is supported by its domestic market…

Turn on the evening news or glance over the headlines of the country’s newspapers and you’ll see the same stories repeated over and over: U.S. home sales down 15% from last year; the DOW and S&P 500 in the bear’s grip; gas prices at record highs.

You can’t get away from the bad news. And chances are, things will only get worse before they get better. In fact, the consumer confidence index recently posted one of its lowest levels in 16 years.

With consumers accounting for 70% of gross domestic product, any pullback in their spending will have an outsized impact on the U.S. economy. In a recent note to clients, Deutsche Bank (NYSE:DB) economists estimated that U.S. annual growth could be cut by a half to a full percentage point if consumers spend less and save more.

But in other countries, like India, it’s a different story altogether.

Unlike what we see here in the U.S., India’s housing market is growing. Just about 10 years ago, India’s working class saved for a lifetime to buy the most prized possession of all: a home. Today it takes less than three years to buy that dream home.

India is entering a new phase where consumer spending is fueling the country’s growth.

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Incomes Are Rising

Why this surge in spending? Well, one of the main reasons is Indian workers are earning more money. Indian salaries have grown by over 25% each year for the past five years. And according to a study in the McKinsey Quarterly, the average Indian household’s annual disposable income will surge by 300% over the next two decades. (That’s more than any of the developed nations.)

There are 350 million people in India who are classified as middle-class. That’s bigger than America. The fact is, India’s middle class is larger than the entire population of the U.S. (a little over 300 million at last count). And the number of Indian consumers will only grow… as will their spending.

Another reason for the surge in consumer spending is that India has been receiving more money from foreign companies. In 2006, foreign companies (also referred to as multinationals) invested $10 billion in India. By 2007, that number increased to $22 billion. The trend looks like it will continue.

The more foreign companies invest in the country, the more money there is for workers. The more money the workers earn, the more they have to spend. Hence the sharp rise in consumer spending.

A recent ad campaign for the State Bank Of India read, “Be a big shopper! Make a big buy! Take home a car, a VCR or a sewing machine today! You can do it now with the big buy scheme…”

In India, Consumers Are Shopping ‘til They Drop

Exactly what kind of items are they buying? Indians are buying the same kind of middle-class status symbols we buy here in the U.S.: televisions, cellphones, leather goods, wristwatches… the list goes on and on.

Over the past seven years, India has seen a 1,700% jump in sales of color televisions. Cellphone purchases soared a whopping 10,400%. That means every hour as many as 10,000 cellphones are sold in India.

The Indian retail market is currently around $312 billion. In fact, retail is India’s largest industry, accounting for 10% of the country’s gross domestic product. Experts suggest that India’s retail market will become the country’s next boom industry.

There are about 3 million mom-and-pop shops spread throughout the country. But don’t be fooled. Just like here in the good ol’ U.S. of A., India has its share of shopping centers and multilevel malls. Mall space in India has doubled each year for the past five years.

But here’s the thing: Unlike Asian countries that depend on exports to the U.S. and Europe, India’s economy is internally driven. That means for the country to maintain its 8% to 9% growth rate a year, it needs consumers to shop until they drop. As all the signs show, India’s fast-growing middle class is happy to comply.

Source: Bigger than America and More Powerful