The Inorbit shopping centre in the northern suburbs of Bombay is like any you would find in the developed world. Teenagers in the latest fashions hang out on benches, swapping ring tones on their mobile phones and swigging soft drinks from cans. Parents nervously watch their children charge around in the play area while they sip frothy lattes before being dragged off to check out the latest must-have toy.

Three floors, topped by a multiplex cinema, offer a range of familiar western brands – Marks & Spencer, Guess, Wrangler, Mothercare – mixed in with local names such as Crossword and Shoppers’ Stop. It is a bustling, air-conditioned bubble of commerce. The difference for these shoppers compared with their peers beyond the Third World, however, is the sheer novelty of the experience. Even five years ago, nothing like this existed in India.

White-haired old ladies, wearing traditional saris, straddle the divide between this new retail world and the old one dominated by small family-owned shops – often little more than a hole in the wall – and open-air markets where goats and cattle wander between the stalls. Guzzling milkshakes in the modern food court alongside denim-clad grandchildren stuffing burgers into their mouths, India’s elder generation seems happy to have made the transition.

All around them, the US mall culture is being embraced. The largest queue in the eating area is not for the traditional Indian fare of dhosas and vada pav, but for Pizza Hut.

“It is totally different from five or ten years ago when you had to go to shopping lanes or exclusive showrooms because there was no other option,” Mukesh Agrawal, 25, a management student, says.

Wearing a Reebok shirt and trainers, Agrawal says he visits a shopping centre once or twice a week to hang out with friends or buy the latest sports brands. “Most of the western brands are affordable,” he says. “People are becoming more stylish and coming closer to the concept of marketing.”

India is undergoing a retail revolution. Spurred by a new brand of consumerism, social classes are being invented with each glass-fronted shopping centre that opens. An unprecedented generation of wealth, spurred by annual economic growth of more than 9 per cent a year, is rapidly moving millions of people up the standard-of-living ladder.

The result is an irreversible social and economic change that many believe will turn India, despite all its problems of poverty, religious friction and neglected infrastructure, into one of the next global superpowers. “There is a tipping point when you reach a certain per-capita GDP – like a hockey stick effect. We are not there yet. China is,” says Anand Mahindra, one of India’s foremost industrialists. “But we’re getting close. If we have two more years of 9 per cent growth, we are there.” Untapped potential is the reason foreigners are itching to break into India, ranked for the past three years as the most attractive investment opportunity for mass-market and food retailers, according to the annual Global Retail Development Index from consultants A.T. Kearney.

“What is happening in retail in India is quite unprecedented in the world,” Paul Merrifield, national shopping centre development manager for Aditya Birla, one of India’s top conglomerates, says. “The huge population base, combined with heady economic growth, seemingly insatiable aspirations, youth and a lack of existing shopping centre in-frastructure, can only create a unique and enormous potential.”

It is still a highly regulated environment, however, in an effort to protect the small shop owner and domestic players. Only single-brand foreign retailers are allowed to operate in India, which explains why Calvin Klein, Guess and Mothercare are common sights. For the moment at least, multibrand operators such as Tesco and Wal-Mart must partner an Indian company.

Wal-Mart, the world’s biggest retailer, will enter the market next year through a joint venture with Bharti Enterprises, a conglomerate that owns India’s leading mobile phone network. The US giant, like all foreign companies, has been dazzled by India’s numbers. The most frequently quoted figure that sparks murmurs of excitement in the international investment community is the size of the country’s new middle class: 250 million – more than four times the population of the UK.

The consensus in India, which has a population of 1.1 billion, is that this is not an overstatement. “There are clearly 50 million households which are truly to my mind middle-class and there are about five members per family, so it’s a reliable number,” Sunil Bharti Mittal, Bharti chairman and a self-made multi-billionaire from Punjab, says.

“I’d say 25 million people are as far in terms of wealth as Europe. And 25 million is a nation in Europe. So you have one big European nation here consuming Louis Vuitton and Chanel and certainly 250 million people consuming more than the basic staple goods. The range is big.”

McKinsey, the consultants, predicts that by 2025 India will be the world’s fifth largest consuming nation, surpassing Germany, with consumption rising fourfold to 70 trillion Indian rupees. Average real household disposable income will grow from 113,744 rupees in 2005 to 318,896 rupees, according to the firm.

“Growth is driven by volume in India. On a per capita basis, it is still very modest by developed countries’ standards. But when you look at the fundamentals, we see dramatic changes ahead,” Eric Beinhocker, senior fellow at the McKinsey Global Institute, says.

India’s next spurt of growth will be driven by its deep pool of young talent. More than half the population is under 25. Its collection of 14 million young professionals – twice the number in both China and the US – is topped up each year by two and a half million graduates.

With a severe talent supply crunch in a booming economy, the best have their pick of jobs. It is not unusual for young executives to have had five jobs in the three to four years since leaving university. And they are applying the same short-term thinking to their consuming habits.

“The Indian consumer is very young and evolving very fast,” Prashant Desai, head of new ventures for Pantaloon Retail, India’s leading retailer, says.

The trend is creating a new fast-living culture at odds with the staunchly conservative values of Indian society. Old Indians buried their rupees in watertight containers; new Indians are putting them into yachts.

“A lot of people have made money and they want the lifestyle, so they are spending. It’s a statement, saying: I have arrived’,” says Gautam Singhania, managing director of Raymond, India’s best-known tailor, who himself is not averse to flashing the cash – commuting in his helicopter and throwing parties on his tri-deck luxury yacht. “The younger generation is standing on its own two feet, not just taking pocket money until they get married. They are earning their own. They travel, need clothes and can buy a house and a car against their income. They want to do better than their parents did.”

Like many Indian industrialists, Singhania believes the real societal shifts in India over the next few years will happen in the second-and third-tier cities. The big metropolises such as Delhi and Bombay are already well advanced – saturated some might say – to the point where top-level salaries and living costs are on a par with the developed world.

“The small cities are where there will be the biggest changes, because the market has been neglected for so long. There is pent-up demand,” he says. “We recently opened a 10,000 sq ft store in Andheri (a Bombay surburb) and had sales of 150,000 rupees on day one. A 2,500 sq ft store in eastern India had opening day sales of 250,000 rupees. I know someone who went into a Rolls-Royce showroom and bought one on impulse on his way to buy a $250,000 stereo system. And he came from Indore [a city in central India famous for its forts, palaces and textiles].”

Middle-income Indians in mid-sized cities have been unleashed not only by rising salaries and a strong rupee but the advent of consumer credit. “If you were here in 2000, you would have seen very different consumer behaviour,” V. Vaidyanathan, head of retail business at ICICI Bank, India’s largest loan provider, says. “There was less willingness and propensity to consume. Loans were available only to the upper economic segment and the average consumer did not have the confidence to borrow. Things have changed.

“Now people can see their own cashflow and [borrowing] has become easy. Finance companies are rushing to give money.” India is already Visa’s largest market for debit cards in Asia, with 34 million customers last year. Barclaycard this year launched three credit cards in India.

“There is an emerging middle class [who are borrowing] in a country where people have a stable income stream and want to buy big-ticket items and spread their payments,” Anthony Jenkins, Barclaycard chief executive, says. “Credit cards always start off as a high-end product. We are clearly past that stage in India. We are starting to see mass-market growth.” The upside is huge. India, as a country, is still hugely underleveraged: borrowings account for only about 10 per cent of GDP, compared with 35 per cent in southeast Asian countries. The average loan value in India is just one seventh of that in the developed world. Most of India’s 600 million-strong rural population does not even have a bank account.

But the changes afoot are tangible. India, traditionally a nation of savers, is becoming a nation of spenders. The best indicator is the mobile phone market, the fastest-growing in the world with six million new subscribers a month. There are estimated to be 165 million in the country today and this number is projected to grow to between 500 million and 600 million by 2011, as first-time phone owners skip the fixed-line step to communication.

Mobile phones are not the preserve of the rich. Taxi drivers, maids, fruit-sellers and street hawkers all have them, lured by local tariffs of one rupee a minute and handsets costing as little as £20.

“We are seeing India transforming and it feels good to be part of it. The real take-off has happened in the last four or five years. India is creating more jobs and that’s created a larger middle class,” Uday Kotak, managing director of Kotak Mahindra, India’s third-largest commercial bank, says.

By 2010, there will be 580 million consumers in the key 15 to 44 age bracket in India, according to CLSA, the brokers. China will have 665 million. The test for India, a messy democracy versus a neat, capitalist autocracy, is to make sure a large proportion of the 600 million people still dependent on agriculture for a living are also invited along for the ride. “That is one of the biggest challenges for India – to ensure more inclusive growth,” Kotak says. “If we can create jobs, it will be.”

The prosperity of mid-tier cities, which act as a bridge to rural India, is key. Without a fairer distribution of India’s new-found wealth, the rich will only get richer and an explosion of social tension lies ahead as the poor are left outside the doors of plush department stores, resentfully eyeing the goodies in the arms of their luckier compatriots.

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