Mumbai -Indian consumers are adopting digital technology at a breakneck rate owing to the lowest mobile data rate in the entire world, fierce competition among telecom providers, and explosive growth of social media and personal entertainment.

Shivam Vahia, a Mumbai resident, cannot recall the last time he went shopping. By pressing a few buttons on his mobile phone, he spends about 30,000 rupees ($364) a month on necessities like groceries, clothing, and gadgets.

"When I go out with friends, I only spend money offline at bars and restaurants," claimed the 24-year-old engineering graduate.

Vahia is one of the 1.4 billion young and aspirational people in India whose propensity for online shopping has drawn the attention of international businesses and digital platforms. And because private consumption drives India's economic expansion, financial investors are looking for new ways to profit from it.

China's consumption increased after its per capita gross domestic product (GDP) surpassed $2,000 in 2006, according to data from the World Bank. According to the bank's most recent data, India crossed that threshold in 2021, which could put it on a similar growth trajectory even though the country faces risks from low job growth and income inequality.

Indian consumers are adopting digital technology at a breakneck rate because they have the lowest mobile data rates in the entire world, thanks to fierce competition among telecom providers and the explosive growth of social media and personal entertainment.

In comparison to China's 13 GB and North America's 15 GB, it has nearly 700 million smartphone users who, according to rating agency ICRA, use an average of almost 17 GB of mobile data daily.

"A rural consumer in India can see what consumers in developed nations are buying, and an urban consumer in India can see what a consumer in a rural area is doing." This aspiration-driven consumption increase has the potential to significantly boost discretionary consumption in the years to come, "Priyanka Khandelwal, a fund manager for ICICI Prudential Asset Management, said.

For investors, the consumption theme can be tapped through traditional consumer companies integrating digital capabilities and cutting-edge Indian tech companies.

When platforms that support online commerce, such as food delivery specialist Zomato, FSN E-Commerce Ventures, which operates beauty and fashion sales platform Nykaa, SoftBank-backed logistics firm Delhivery, and payment firm Paytm, recently listed in the Indian market, opportunities for exposure poured in for them.

According to estimates from Bain & Co., with 180–190 million online shoppers, India will have the third-largest online shopping market in the world after China and the United States.

“Investors can play the online and digital consumption boom in India directly through the tech companies enabling this space, or indirectly through supported industries like logistics or fintech,” said Kunjal Gala, head of global emerging markets at Federated Hermes.

Traditional businesses, currently suffering from low penetration and per capita usage, provide another promising avenue for investors.

According to CLSA data, India's per capita food consumption in 2020 was $314 compared to $884 for China, while clothing consumption was $53.9 versus $212.9 for China. According to the data, per capita, spending on health-related items in India was $56.8 in 2020, compared to $389.3 in China.

"A pattern will continue to repeat for years in India: industry after industry emerging from a long period of under-penetration" and moving up the per capita consumption scale," said Vikas Pershad, portfolio manager for Asian equities at M&G Investments.

The variety of industries will include cement, automobiles, two-wheelers, housing finance companies, and healthcare delivery (hospitals).

According to Khandelwal of ICICI Prudential and S Naren, a chief investment officer of the fund, as Indians' incomes and wealth increase, so will their aspirational needs for packaged food and beverages, branded products, travel, preventive healthcare, and personal care.

Foreign portfolio investors have jumped on board quickly because India's $3.5 trillion GDP is made up of 60% private consumption.

According to information from India's National Securities Depository Ltd., they invested a net $2.7 billion in four important consumer sectors during the first 11 months of the fiscal year 2022–23 (April–March)—automobiles, consumer durables, consumer services, and FMCG.

In contrast, there was a $5.9 billion outflow from the larger Indian equity markets.

In their pursuit of India's consumption boom, investors have undoubtedly encountered some difficulties. Since their initial public offerings, shares of new-age technology companies have lost value, and while they now trade at more affordable valuations, they are still expensive compared to the industry median.

Additionally, the majority of conventional consumer-oriented businesses are valued above the benchmark index.

According to David Chao, global market strategist at Invesco Asia Pacific, segments like quick service restaurants and consumer durables are expected to grow "outsized" in the near future. Indian equities are still quite expensive, both historically and relatively, when compared to China, for example.

But he added that investors need to look beyond that. "To be an investor and make money in India, you have to take a longer time horizon."