Premiumisation in a Price- Sensitive Market Why Indians are Trading Up

For decades, multinationals entering India followed the same playbook: strip the product down, cut the price, and pray the volumes make up for the margins. The logic was simple: Indians are price-sensitive, the middle class is massive, and whoever
cracks the `10,000 price point wins. It was not entirely wrong advice, at least for a while.
The Death of the Entry-Level Playbook
Recent trends suggest this playbook is effectively dead. Spend 20 minutes at any Tata or Hyundai dealership in a Tier-I or Tier-II
city today, and it becomes obvious. The base variant almost sits in oblivion, both for the customer and the salesperson. The
pitch starts at mid-trim at best, and usually somewhere higher. In 2024, the unthinkable happened: hatchbacks and minis, once
found in every second household, slipped to 28 per cent market share, while expensive, large SUVs gained 50 per cent. Even
the electric vehicles are coming in the form of SUVs.
This sudden love for SUVs should not be considered a phase in the Indian economy but rather a real cultural shift. Many
view the pandemic as the point zero of this K-shape change. At the top of the curve, Lamborghini and Mercedes-Maybach
posted record sales in India in 2025. Apple broke into the global top five markets. While at the bottom, mass-market FMCG
brands are still fighting over single-rupee price hikes. The same economy, two completely different consumption stories running
in parallel.
Fintech: The Architect of Aspiration
However, we need to perform a retrospective analysis of this shift to understand the driving factor behind the exponential
increase in K.
The fractional contribution to this drive is household income growth. However, the dominant contribution comes from fintech,
with revolutionary schemes such as no-cost EMIs, low-cost EMIs, and Buy Now Pay Later. These schemes led Indians to ask
only one question: “Can I afford this?” Moreover, the answer is almost always a “yes”. A `1.2 lakh phone becomes `5,000 a
month. A premium SUV becomes a manageable EMI that fits neatly between rent and groceries. The sticker price is increasingly
irrelevant. The monthly cash outflow is the new price point.
This has expanded the addressable market for premium goods in ways that no amount of GDP growth alone could
have managed. Young professionals in Coimbatore and Bhopal are buying the same iPhone as someone in Bandra.
The geography of aspiration has quietly gone national.
The Legacy Anchor
For companies, this creates an uncomfortable problem. After 30 years of prioritising scale over substance, companies built on
cost-cutting cannot simply pivot to an experience-centric model overnight; their institutional instincts fundamentally mismatch
the task. Transitioning to a more affluent consumer base requires a set of competencies that lean, efficiency-obsessed organisations often find impossible to execute — namely, the ability to cultivate genuine brand loyalty, invest heavily in long-
term customer support, and maintain premium pricing, even when the historical impulse is to slash rates for volume. That would be more than a strategic pivot for those brands; they would have to rebuild and rewrite their story. That is not a tweak to
the existing model. It is a different business.
The firms that are winning apprehend this. They are not just selling a better product; they are selling an identity. The
consumer is not buying a car or a phone. They are buying a version of themselves they want to become. Brands that have
figured out how to sell that story and price it accordingly are cleaning up. Those still leading with discounts and EMI
calculators are slowly becoming irrelevant to the segment that actually has money to spend.
India is not becoming a luxury market overnight. However, the consumer in the middle, the one brands spent 30 years
designing for, is quietly disappearing, either moving up or getting squeezed out. The “value-for-money” Indian has not gone
anywhere. They have just redefined what value means.
The Identity Economy
If one thinks from an eagle’s perspective, the sunroof obsession is not really about having a sunroof; it is about owning a
vehicle with premium features. Owning an iPhone has become more of a symbol than using its features. New and
upcoming brands in India have recognised this demand and are crafting stories that position their products as premium
and unique.
More recently, shoe brands like Comet and Gully Labs have been generating revenue and capturing audiences exponentially,
something Bata has failed to do. Thus, in the next decade, whoever tells the most unique and premium stories will win India’s
“affluent 100 million”.