Last Updated: August 22, 2014
CEO and President, South West Asia Samsung
Updated: June, 2014
DURABLES SECTOR REPORT | April, 2014
FMCG SECTOR REPORT | April, 2014
India has been a consumption-driven economy for the last many decades. Consumer spending in the country is expected to increase about 2.5 times by 2025. Broadly categorised into urban and rural markets, the Indian consumer segment is gaining high attention and pampering from marketers across the globe.
Global corporations view India as one of the key markets from where future growth will emerge. The growth in India’s consumer market will be primarily driven by a favourable population composition and rising disposable incomes. A recent study by the McKinsey Global Institute (MGI) suggests that if India continues to grow at the current pace, average household incomes will triple over the next two decades and the country will become the world’s fifth largest consumer economy by 2025, up from 12th at present.
The Government of India plays a catalytic role in the growth of Indian consumer segments and their welfare. It has eased key rules on foreign direct investment (FDI) in an attempt to attract foreign firms to boost economic growth. As people are demonstrating an increasing interest in online shopping, future prospects pose a tremendous growth opportunity for retail and FMCG players alike.
India is likely to emerge as the world’s largest middle class consumer market with an aggregated consumer spend of nearly US$ 13 trillion by 2030, as per a report by Deloitte titled 'India matters: Winning in growth markets'.
Fuelled by rising incomes and growing affordability, the consumer durables market is expected to expand at a compound annual growth rate (CAGR) of 14.8 per cent to US$ 12.5 billion in FY 2015 from US$ 7.3 billion in FY 2012. Urban markets account for the major share (65 per cent) of total revenues in the Indian consumer durables sector. In rural markets, durables, such as refrigerators, and consumer electronic goods are likely to witness growing demand in the coming years. From US$ 2.1 billion in FY 2010, the rural market is expected to grow at a CAGR of 25 per cent to touch US$ 6.4 billion in FY 2015.
The growth of internet retail is going to complement the growth of offline retail stores. Online retailing, both direct and through marketplaces such as eBay, will triple to become a Rs 50,000 crore (US$ 8.34 billion) industry by 2016, growing at a whopping 50–55 per cent per year over the next three years, according to rating agency Crisil.
With growing consumerism and disposable income, India's used goods market is likely to touch Rs 115,000 crore (US$ 19.18 billion) by 2015 from Rs 80,000 crore (US$ 13.34 billion) at present, according to a study by an industrial body. Whether consumer goods like electronics, durables, automobiles, etc., or industrial machinery in the capital goods sector, the options of reusage are being considered more actively than ever before.
The following are some of the major investments and developments in the Indian consumer markets sector:
The Government of India has allowed 100 per cent FDI in the electronics hardware-manufacturing sector under the automatic route. It has also allowed 51 per cent FDI in Multi-Brand Retail Trading (MBRT) and 100 per cent in Single-Brand Retail Trading (SBRT) in order to bring more foreign investment into the country.
Hyderabad will soon have a Rs 100 crore (US$ 16.68 million) National Institute for Footwear Design and Development. The Andhra Pradesh government has apportioned the required land at Gachibowli in Cyberabad. Funds for the national centre have already been approved by the Commerce Ministry.
India is poised to become a substantial market for wearable technology such as smart watches and fitness monitors, driven by keen consumer interests in these latest gadgets and increasing spending on consumer durables. Respondents from India were most interested in buying fitness monitors (80 per cent), smart watches (76 per cent) and internet-enabled eyeglasses (74 per cent), according to Accenture's Digital Consumer Tech Survey 2014.
Nielsen estimates that rural India’s FMCG market will touch US$ 100 billion by 2025. Online portals are expected to play a vital role for companies trying to access these markets. The Internet allows for a cost-effective means to increase a company’s reach by overcoming geographic barriers. Today, with rural India empowered with computers and smartphones, the Internet is slowly gaining a foothold.
Exchange Rate Used: INR 1 = US$ 0.01668 as on May 09, 2014
References: Media Reports, Press releases
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.