From overseas holidays and foreign degrees to AI subscriptions and premium gadgets, India's growing middle class is increasingly spending on products and services linked to foreign currencies. As aspirations become more global, economists say Indian households are also becoming more exposed to currency movements, raising an important question: Is the country's consumption story quietly becoming more dollar-intensive?
When Prime Minister Narendra Modi in May 2026 urged Indians to avoid non-essential foreign travel, postpone discretionary gold purchases for at least a year to help conserve foreign exchange amid disruptions caused by the West Asia conflict, the appeal reflected more than a temporary response to geopolitical uncertainty. It underscored a structural shift underway in India's consumption economy.
A growing middle class—larger, wealthier and more globally connected than ever before—is increasingly spending on goods and services priced directly or indirectly in dollars. International holidays, overseas education, AI subscriptions, streaming platforms, premium electronics, imported luxury products and even fuel consumed through greater mobility all carry a foreign exchange footprint.
The phenomenon comes as India's middle class itself expands rapidly.
Rajesh Shukla, Managing Director and Co-Founder of think tank People Research on India's Consumer Economy (PRICE), in a February 2025 analysis, stated that this segment— comprising households earning between ₹6 lakh and ₹36 lakh annually at 2024-25 prices—has grown to encompass over 560 million people across 126 million households. Earlier, in a 2023 report, Shukla had projected the middle-class population to reach 715 million by 2030-31 and cross one billion by 2046-47, making it one of the world's largest consumer markets.
A new source of forex demand
For decades, India's foreign exchange demand was largely shaped by crude oil imports, capital goods and corporate trade.
"A decade ago, India's dollar demand was largely driven by crude oil imports, corporate borrowing and merchandise trade. Today, the middle class has become a meaningful contributor to forex demand," Ponmudi R, CEO of Enrich Money, told ET Online.
He highlighted that overseas travel, international education, global OTT platforms, AI subscriptions, cloud software, gaming, imported electronics and cross-border e-commerce have together created a structural shift in household consumption.
Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, echoed the view. "Consumer-led dollar demand has grown meaningfully over the past decade due to higher spending on overseas travel, education, digital subscriptions and global investments. While oil imports remain the largest driver, household demand for dollars is becoming an increasingly important structural component," he told ET Online.
Yet both experts caution against overstating the trend. Retail spending alone, they said, is unlikely to dictate RBI policy, as exports, imports, FDI and portfolio flows continue to dominate India's external account.
However, sustained growth in household dollar demand could become an increasingly important variable over the next decade.
Also read: The 'little boy' in the Pacific, India's monsoon and the big test ahead
