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Indian Private Consumption Falling As % of GDP

While I like to believe India is a great consumption economy, look at the way private consumption has gone in the last thirty years:


From IMF paper.

From nearly 80% of GDP, private consumption is now around 50% – that means more and more of our economy is dependant on the other factors: Fresh investment, Government Expenditure and Net Exports. The good thing still is that if we encourage private consumption, we will have the highest GDP impact; but our policies lead us to desire saving instead of spending.

The IMF paper also puts India’s Gross Debt at 79% of GDP, while mentioning the US as only 92% of GDP. When measured using similar criteria, the US would have shot way past 100% of GDP, but that’s the kind of twisted metrics IMF would like to use. (Fine, just sell us all your gold before you die.)

The paper’s interesting but a lot of data needs revalidation.

From Indian official figures too, we’ve seen a decline from 1997. (Source)




Private consumption has been dipping and a larger amount of GDP has been as investments, or “gross capital formation”. Lots of interesting data there, more charts on another day.

  • Rudra says:

    >Hi Deepak,

    It should be Private Consumption and Govt Expenditure, not the other way round. Please fix the typo.

  • Deepak Shenoy says:

    >Done, thanks

  • Mohit says:


    What freaks me out is the nature of this 'investment'. Every where you go in India, you see massive works under way – but the shabbiness and incompleteness of it all makes me scream – GRAFT, INCOMPETENCE. I suspect that – when we look back at this period – 2005-2010 – we re going to see Incremental Capital Output Ratios (ICOR) dropping.


  • MJ says:

    This does indicate to me a continuing dependence on trade flows/Foreign investments…It is quite a stark contrast to the usual story line of the humongous Indian middle class and contrast with Export dependent SE Asian economies(both of these still true, but it shows that India GDP is not as inward looking as we thought). So it still makes us prone to run-on-the-money or sudden risk aversions in investor sentiment causing hot money to flow out and impact growth…