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Consumer Markets

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Indian Consumer Market

May, 2013

Indian Consumer Markets: Brief Overview

Indian consumer markets – broadly bifurcated as rural and urban – are driving the country’s economy in a big way. Rising disposable income in the hands of growing Indian middle class, better healthcare services, awareness about education and more sophisticated services are driving aspirational consumer behaviour.

Experts count the initiation of Indian economy’s growth from back 1990s, when the middle class consumer power began to explode, followed by trade-liberalisation in 1991. As a result, foreign direct investment (FDI) started pouring-in increasingly into the Indian consumer markets.

Recent Developments/ Investments

Many foreign majors are betting big on prospective growth of Indian consumer markets. Companies across every segment – from consumer durables to aviation – are trying hard to woo Indian consumers in every possible way and hence are escalating their investments in the Indian markets.

  • While Japan’s Panasonic Corp plans to invest around Rs 1, 500 crore (US$ 270.59 million) over 2013-16 for expansion, Korea’s LG Electronics anticipates that India will be amongst its top three markets within three years. India is currently LG’s fifth biggest market globally after US, South Korea, Brazil and Russia
  • Similarly, Anglo-Dutch Consumer goods company Unilever has announced to increase its stake in Indian subsidiary, Hindustan Unilever (HUL) to 75 per cent. Calculations suggest that Unilever would be spending around Rs 29, 200 crore (US$ 5.27 billion) in the open offer to increase its stake in HUL
  • Meanwhile, India was the largest contributor to the global revenues of London based, GlaxoSmithKline Consumer Healthcare (GSKCH) in 2012. In February 2013, parent GlaxoSmithKline spent about Rs 5, 222 crore (US$ 942 million) to increase its stake in the Indian unit to 72.46 per cent
  • Since the relaxation of FDI regime in multi-brand and single brand retail, many foreign majors have planned to escalate their investments in India. The amount of FDI between April 2000 and January 2013 stood in tune to US$ 42.7 million for single-brand retail ventures only. That amounted to 0.02 per cent of overall FDI in India, according to a Department of Industrial Policy and Promotion (DIPP) fact sheet.
    For instance, Swedish home and lifestyle retailer Ingka Holding Overseas BV, which operates Ikea, has also proposed an investment of Rs 10, 500 crore (US$ 1.89 billion) in India under single-brand retail
  • Indian apparel industry is also scaling new heights owing to rapid urbanisation, growing consumer class and changing fashion trends. This has further lead to retail penetration, growing service class and the increasing share of the designer wear. Zara, for example, is a Swedish apparel brand that performed beyond expectations in urban Indian markets
  • Social networking giant Facebook intends to make India its largest market in terms of number of users. India is its second largest market after the US with 78 million users and would definitely become the largest owing to fast paced growth of mobile and data services.
    The social networking company saw a 50 per cent increase in its user base in India in 2012. The company is also aggressively undertaking operator partnerships to drive up usage. It had clinched deals with Airtel, Reliance, Aircel and Idea for allowing their subscribers to surf Facebook for free. Its recent deal with Nokia is another example wherein Airtel subscribers buying Nokia Asha 501 will get free data access for all mobile Facebook Web pages
  • The Indian consumers, especially the urban clan, are increasingly getting aware of health services and give immense importance to body fitness to catch up with their busy lifestyles. By industry estimates, the Indian fitness wear market (majorly comprising shoes) is estimated at around Rs 4, 000 crore (US$ 721.56 million), growing at an annual rate of around 25 per cent. Realising the opportunity, Puma has launched high-performance running shoes called Mobium Elite in its 270 stores across India. On the similar lines, Reebok India is all-ready to roll out its new "fitness strategy" in the country

Catching-up Online

  • Indian smart-phone users access internet more than their counterparts in the US, according to a mobile survey conducted by IPSOS and Google. The survey pointed that 36 per cent of all smart-phone owners in India are in the age group of 18 - 29. Meanwhile, social media is penetrating deep in the lives of Indian internet users. here are 110 million internet users in the country and 62 million on the Facebook
  • India is among the top three fastest growing Internet markets in the world, stated a study by industry body Assocham and ComScore. "Among the BRIC nations, India has been the fastest growing market adding over 18 million Internet users and growing at an annual rate of 41 per cent”, according to the study