Global consulting firm McKinsey & Company has identified India as a key focus area for high-street fashion brands, as manufacturers shift their attention to Asian growth markets like India due to challenges in China. According to McKinsey’s latest report, the economic slowdown in China, evolving consumer preferences, and the revival of international travel have complicated the growth outlook for fashion brands there, pushing them to explore other Asian sourcing destinations.
The report emphasizes that global fashion executives now rank Asian markets as their top sourcing regions for the next five years. Regulatory incentives and increased manufacturer capabilities in countries like India are contributing to this trend. McKinsey highlighted that India is set to play a more significant role in the global apparel industry as international brands expand their manufacturing footprint.
India’s Mid-Market Segment to Drive Growth
India’s strong economic performance positions it as a critical market for global fashion, particularly in the mid-market segment. The report projects that this segment will grow by 12% to 17% by 2025, far outpacing the anticipated low single-digit growth of the global fashion industry. India’s rapid economic expansion is making it a focal point for fashion manufacturers looking to tap into new consumer bases.
Despite India recording the highest percentage of apparel quality failures in 2023, the report indicates improvements are underway. The Indian government has allocated around $2.5 billion in production-linked incentives (PLI) and has introduced reforms aimed at enhancing quality control standards. Additionally, foreign investment in the sector has tripled since 2019, reflecting growing confidence in India’s manufacturing capabilities.
The report highlights India’s burgeoning middle class, which currently includes 430 million people—greater than the combined middle classes of the US and Western Europe. This figure is expected to reach 1 billion by 2050, with most of the growth coming from tier-two and tier-three cities. Digitization is accelerating demand, especially among younger consumers, who make up 66% of the population (over 808 million people).
The luxury market in India is also expected to expand, driven by a rising number of ultra-high-net-worth individuals (UHNWI). The report predicts a 50% increase in UHNWIs—those with assets exceeding $30 million—between 2023 and 2028, making India the fastest-growing market for such individuals. The number of aspirational customers, who account for about half of global luxury sales, is expected to increase from 60 million in 2023 to 100 million by 2027.
Apart from India, the report also sees growth potential in other Asian markets like Japan. However, India’s economic trajectory, regulatory environment, and demographic advantages position it as a standout market in the region, poised to lead high-street fashion manufacturing and consumption growth in the coming years.
India to Become World’s Third-Largest Consumer Market by 2027
The report concludes that India’s economy, expected to grow at 7% annually and become the fourth-largest globally by 2025, is on track to become the world’s third-largest consumer market by 2027. This expansion is expected to be fueled by a robust middle class, increasing digital adoption, and rising consumer demand across both mid-market and luxury segments.
