Consumer Markets

Indian Consumer Market

Latest update: February, 2015

Size of the consumer durables market in India

Consumer durables market is expected to double at 14.8 per cent CAGR to US$ 12.5 billion in FY15 from US$ 6.3 billion in FY10.

Size of the consumer durables market in India

Per-capita income in India

Per capita income in India is expected to expand at a CAGR of 5.4 per cent during 2010-2019.

Per-capita income in India

Trends in FMCG revenues over the years in India

The FMCG sector in India generated revenues worth US$ 36.8 billion in 2012, a 5.7 per cent rise compared to the previous year.

Trends in FMCG revenues over the years in India

Market break-up of Indian FMCG industry

Food products is the leading segment, accounting for 43 per cent of the overall market in terms of revenue.

Market break-up of Indian FMCG industry

Updated: February, 2015

DURABLES SECTOR REPORT | October, 2014

FMCG SECTOR REPORT | October, 2014

Introduction

India's consumer confidence continues to remain highest globally and showed improvement in the fourth quarter of calendar year 2014 (Q4), riding on positive economic environment and lower inflation. Nielsen's findings reveal that the consumer confidence of urban India increased by three points in Q4 from the preceding quarter. With a score of 129 in Q4, urban India's consumer confidence is up by 14 points from the corresponding period of the previous year (Q4 of 2013) when it stood at 115. The current score helps India stay on top of the global consumer confidence index for the quarter and is followed by Indonesia and Philippines, each of which have a score of 120.

The ensuing optimism among consumers and the slowdown in China have combined to help India unseat China at the top of Credit Suisse Research Institute’s Emerging Consumer Survey study released recently. The survey conducted across nine emerging economies has seen India jump four ranks. Average household incomes increased 10 per cent in India in 2014 after remaining nearly the same for two years, the study claimed. This revival in consumer sentiment has primarily been driven by urban India.

India's market is consumer driven, with spending anticipated to more than double by 2025. The Indian consumer segment is broadly segregated into urban and rural markets, and is attracting marketers from across the world.

Global corporations view India as a vital market for the future. India has a young demographic and a middle class with rising disposable income. If the country can sustain its current pace of growth for some time - and that is likely - average household incomes will triple over the next 20 years and India will become the fifth largest consumer economy in the world by 2025, as per a study by the McKinsey Global Institute (MGI).
The Government of India has also played a major role in the growth of this segment. It has enacted policies that have attracted foreign direct investment (FDI) and as a result boosted economic growth.

Market size

The growing purchasing power and the rising influence of the social media have helped the Indian consumers to splurge on good things. A study done by a leading industry body and Yes Bank has stated that the consumer spending in India is expected to quadruple to US$ 4.2 trillion by 2017.

As per GSMA's study 'Smartphone forecasts and assumptions, 2007-2020' India ranks fourth in the top 10 global smartphones markets. The country had 111 million smartphone connections in the April-June quarter of 2014, behind leader China, US and Brazil.

India could become the world's largest middle class consumer market with a total consumer spend of nearly US$ 13 trillion by 2030, as per a report by Deloitte titled 'India matters: Winning in growth markets'.

On the back of better incomes and increasing affordability, the consumer durables market is anticipated to expand at a compound annual growth rate (CAGR) of 14.8 per cent to US$ 12.5 billion in FY15 from US$ 7.3 billion in FY12.

Online retailing, both direct and through marketplaces, will grow threefold to become a Rs 50,000 crore (US$ 8.06 billion) industry by 2016, as per rating agency Crisil. Also, the growth of internet retail is expected to boost offline retail stores.

Investments

Following are some of the major investments and developments in the Indian consumer market sector.

  • Emami, the flagship company of the Rs 10,000 crore (US$ 1.61 billion) Emami Group, has acquired a controlling 66.67 per cent stake in Fravin of Australia along with its three subsidiaries. Emami International FZE, a subsidiary of Emami, was the special purpose vehicle for this first global acquisition by the group. This international acquisition marks Emami's entry into the fast growing natural and organic personal care segment and is in line with the company's strategy to be present in sectors with high-growth potential.
  • India’s Internet economy will grow to almost Rs 10 trillion (US$ 161.29 billion) by 2018, accounting for 5 per cent of the country’s gross domestic product (GDP), according to a report by the Boston Consulting Group (BCG) and Internet and Mobile Association of India (IAMAI). India’s Internet economy, which was about Rs 3.6 trillion (US$ 58.06 billion) in 2013, contributed 3.2 per cent to the GDP, the largest among the developing countries and sixth largest globally, the report said. About half the population, or 580 million Indians, will be online in the next three years, including people from all age groups, women and the rural population.
  • Custo Barcelona, the Spanish apparel brand of Custo Dalmau, has entered India. The brand has started its operations with two stores, in Delhi and Mumbai, and will then expand over a period. Its sale will be limited to exclusive outlets, and there will be no multi-brand retailing.
  • US-based semiconductor company Freescale that has R&D facility in India, said that it is enabling its partners to bring smart products to facilitate the government's Rs 1.13 trillion (US$ 18.22 billion) Digital India initiative. Freescale maintains digital networking and automotive R&D centres with a 1,000 strong employee base in Bengaluru, Hyderabad and Noida, and offers a plethora of reference designs to enable smart products that leverages sensors, processors and microcontrollers.

Government Initiatives

The Government of India has allowed 100 per cent FDI in the electronics hardware-manufacturing sector through the automatic route. It has also enabled 51 per cent FDI in multi-brand retail and 100 per cent in single-brand retail to attract more foreign investment into the country.

Hyderabad will soon have a Rs 100 crore (US$ 16.12 million) National Institute for Footwear Design and Development. The Government of Andhra Pradesh has set aside the required land at Gachibowli in Cyberabad. Funds for the centre have been sanctioned by the Ministry of Commerce, India.

With the demand for skilled labour growing among Indian industries, the government plans to train 500 million people by 2022, and is encouraging private players and entrepreneurs to invest in the venture. Many government, corporate, and educational organisations are putting in the effort to train, educate and produce skilled workers.

Road Ahead

India could soon become an important market for wearable technology such as smart watches and fitness monitors, driven by consumer interests in these latest gadgets and the increasing spending on consumer durables. In Accenture's Digital Consumer Tech Survey 2014, 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).

Research firm Nielsen has projected that rural India's FMCG market will go past the US$ 100 billion mark by 2025. Online portals are expected to play a key role for companies trying to break into the hinterlands. The Internet has contributed in a big way, facilitating a cheaper and more convenient means to increase a company's reach.

Exchange Rate Used: INR 1 = US$ 0.016 as on February 25, 2015

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.

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