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Last Updated: May 20, 2016
De Beers Group
Latest update: March, 2016
Last Updated: March, 2016
India's demographic profile predominantly consists of young population which is increasingly turning urban. From a foreign investors’ point of view, it is an attractive proposition with several long term opportunities. The Government of India too has focussed on urban development in the country with specific programs such as smart cities and many more. A large and growing middle class, prominent in such urban centres, is not only increasingly consuming higher end goods and services but also redefining the luxury market.
India's urban population is expected to touch 590 million in 2030, from 340 million in 2008^. This increase in growth is expected to lead to several positive consequences such as abundant employment opportunities and creation of new markets due to untapped demands of an increasingly urban population.
Urban expansion is also anticipated to take place at a rapid rate. For instance, in the period 1971-2008, the country's urban population increased by 230 million; the addition of the next 250 million will likely take place in half that time.
India’s urban population would increase to 38 per cent by 2026, compared to in the country, which is 28 per cent in 2001 as per Census 2001. The growth in urban population is estimated to make up for over two-thirds (67 per cent) of total population increase by 2026. Out of the total population increase of 371 million during 2001-2026 in India, the increase in urban population is expected to be 249 million.
Online retailing, both direct and through channels such as eBay, will grow threefold and become a Rs 50,000 crore (US$ 7.34 billion) industry by 2016, increasing at 50-55 per cent annually#. By 2030, cities will generate 70 per cent of net new jobs creation, more than 70 per cent of the country's Gross Domestic Product (GDP), and drive a fourfold increase of per capita income across India##.
The importance of rapidly-growing metro areas is brought out by the fact that urban areas drive national growth to a significant extent. Cities are estimated to contribute around 70 per cent to the country’s Gross Domestic Product (GDP) by 2030###.
Companies and a new generation of entrepreneurs are aiming to tap into unmet needs of urban population. The emergence and rapid growth of app-based cab service companies such as Uber and Ola are examples in the transportation sector. Similarly, several internet and mobile based services – from grocery deliveries to finding doctors – are all trying hard to secure a foothold in the high potential urban market. Apart from basic services, several niche players with designer products and premium offerings are also trying hard to establish themselves in the urban consumer market. The growing customer base for luxury products coupled with the awareness of international labels and discounts are driving the business of premium products online.
Prime Minister Mr Narendra Modi had launched three government flagship schemes in June, 2015 aimed at changing the face of urban India—Smart Cities mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Housing for All mission with an expected expenditure of around Rs 4 trillion (US$ 59.3 billion) over the next few years. The government has completed stage one of the Smart Cities Mission worth Rs 1 trillion (US$ 14.82 billion) by shortlisting 100 cities across India for the plan. The Government of India plans to spend Rs 50,000 crore (US$ 7.41 billion) to develop 100 smart cities in the country, with each selected city to receive assistance of Rs 100 crore (US$ 14.82 million) per year for five years.
Growing income levels, a youthful demographic and increasing preference for brands in urban areas are driving urban market growth. Already the urban markets are witnessing steady growth in traditional goods and services such as fast moving consumer goods. The country is also set to become a vital market for wearable technology such as smart watches and fitness monitors, driven by consumer interest in such gadgets and the growth of spending on consumer durables.
Exchange Rate Used: INR 1 = US$ 0.0148 as on July 11, 2016
References: Media Reports, Press releases, TSMG report, MGI report, Press Information Bureau (PIB)
Notes: ^ - As per a McKinsey Global Institute (MGI) report ‘India’s Urban Awakening: Building inclusive cities, sustaining economic growth’, # - as per Crisil, ## - , as per research by McKinsey & Company, ### - As per Mr A Venkateshwar, chief (corporate affairs), Tata Projects Limited, and convener of the panel of Confederation of Indian Industry (CII)-AP infrastructure
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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