Indian Consumer Market

Introduction

Indian consumer durables market is broadly segregated into urban and rural markets and is attracting marketers from across the world. The sector comprises of a huge middle class, relatively large affluent class and a small economically disadvantaged class. Global corporations view India as one of the key markets from where future growth is likely to emerge. The growth in India’s consumer market would be primarily driven by a favorable population composition and increasing disposable income.

Market Size

• Appliances and consumer electronics industry is expected to double to reach Rs. 1.48 lakh crore (US$ 21.18 billion) by 2025.
• In May 2021, consumer durables output increased by 98.2%, compared with 70.3% decline in May 2020.
• Electronics hardware production in the country increased from Rs. 4.43 trillion (US$ 72.38 billion) in FY19 to Rs. 5.47 trillion (US$ 89.38 billion) in FY20.
• In FY20, TV penetration in India stood at 69%, driven by the DTH market. As of December 2020, active DTH subscribers stood at 70.99 million in the country, as compared with 70.7 in September 2020.
• As of FY20, electronics, domestic appliances and air conditioner market in India were estimated to be around Rs. 5,976 crore (US$ 0.86 billion), Rs. 17,873 crore (US$ 1.80 billion) and Rs. 12,568 crore (US$ 2.56 billion), respectively.
• According to India Cellular & Electronics Association (ICEA), India has the potential to achieve a value of US$ 100 billion in manufacturing of laptops and tablets by 2025.
• Smartphone shipments in India increased 8% y-o-y to reach 152.5 million units in 2019, thereby making it the fastest growing among the top 20 smartphone markets in the world.
• According to a report by Care Ratings, consumer electronics and appliances manufacturers are set to increase their production by 5-8% in FY22, after witnessing a contraction in demand in FY21.
• According to RedSeer, India's consumer digital economy is projected to reach US$ 800 billion by 2030, from US$ 85-90 billion in CY20, driven by increase in online shopping.

Investments

According to Department for Promotion of Industry and Internal Trade, between April 2020 and March 2021 (FY21), exports of electronic goods from India stood at US$ 11.1 billion.

Between April 2000 and March 2021, Indian electronic goods attracted FDI inflows of US$ 3.1 billion.

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

• TCL Group announced, in June 2021, to start manufacturing handsets and TV display panels (from the fourth quarter) in Andhra Pradesh. The company plans to recruit 1,000 employees. This development was in line with the company’s plan to invest ~US$ 219 million to manufacture display modules in the country.
• In April 2021, Godrej Appliances announced an investment of Rs. 100 crore (US$ 13.6 million) across two of its manufacturing facilities—Shirwal in Maharashtra and Mohali in Punjab—to expand its production capacity for air-conditioners (to 800,000 units) by 2025.
• In April 2021, Zetwerk Manufacturing, a B2B online marketplace, announced that it is entering the apparel and consumer durable sectors amid increased demand and supply chain disruptions after the outbreak of COVID-19.
• Super Plastronics, a brand licensee for Kodak HD LED TVs for India, announced in March 2021 that it will invest Rs. 300 crore (US$ 40.26 million) to strengthen its capabilities in IoT technologies and tap emerging opportunities in the smart home devices market.            
• In January 2021, Panasonic India announced its plan to double its residential air-conditioning business by 2024.
• In January 2021, the Indian smartphone firm, Lava Mobiles released the world's first customisable smartphone that enables users to select components, such as camera, memory, storage space and colour, from the company's website on their own.
• In November 2020, Saudi Arabia's Public Investment Fund invested Rs 9,555 crore (US$ 1.29 billion) in Reliance Retail, taking the total fundraise in the last two months to Rs 47,265 crore (US$ 6.37 billion).
• In November 2020, three private equity funds—Investcorp, Norwest Venture Partners and Gaja Capital together invested ~Rs. 800 crore (US$ 110 million) to acquire ~ 31% stake in Xpressbees, the e-commerce focussed end-to-end supply chain solutions provider.
• In November 2020, Pegatron Corp., an iPhone assembler in Taiwan, announced its plans to invest US$150 million in building a plant in India.
• In October 2020, the Karnataka government approved a Rs. 3,540 crore (US$ 482.63 million) investment by Aequs SEZ Private Limited to develop a consumer electronics and durables goods (CEDG) cluster in Hubballi—about 430 kms from Bengaluru.
• In October 2020, Amazon India launched new specialised fulfilment centre with a storage capacity of 1.2 million cubic feet in Bengaluru, which is specialised to store and manage customer orders from the large consumer appliances and furniture categories in their portfolio.

Government Initiatives

• In July 2021, the government approved 14 companies under the production linked incentive (PLI) scheme for IT hardware. Over the next four years, these companies are expected to fuel total production of >US$ 21.64 billion.
• In June 2021, the government extended the production-linked incentive (PLI) scheme for large scale electronics manufacturing by a year (until FY26), giving a boost to the industry.
• The Indian government has been encouraging to consumer durable brands in India to ‘Make in India’ thereby expecting they should be self-reliant for the future; consumer too are showing an affinity towards homegrown products
• The National Policy on Electronics 2019 is targeting production of one billion mobile handsets valued at US$ 190 billion by 2025, out of which 600 million handsets valued at US$ 100 billion are likely to be exported.
• The Government of India has allowed 100% Foreign Direct Investment (FDI) under the automatic route in Electronics Systems Design and Manufacturing sector. FDI into single brand retail has been increased from 51% to 100%; the government is planning to hike FDI limit in multi-brand retail to 51%.
• In September 2020, the Government of India planned to offer production-linked incentives worth Rs. 1.68 trillion (US$ 23 billion) to companies such as consumer appliance, automobile and solar panel to attract companies to establish manufacturing plants in India.
• On November 11, 2020, Union Cabinet approved the Production-Linked Incentive (PLI) scheme in 10 key sectors (including electronics and white goods) to boost India’s manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat’ initiative.
• Mobile phone exports in India are expected to reach a record of US$ 1.5 billion in 2020, of which 98% are expected to be smartphones.
• The PLI scheme, which has been approved for 16 electronics firms, including 10 manufacturers of mobile handsets, would further improve India's role in the global mobile market and complement the goal of making the country a global mobile production hub for manufacturers.

Road Ahead

Indian appliance and consumer electronics (ACE) market is expected to increase at 9% CAGR to reach Rs. 3.15 trillion (US$ 48.37 billion) in 2022. Demand growth is likely to accelerate with rising disposable income and easy access to credit. Increasing electrification of rural areas and wide usability of online sales would also aid growth in demand.

Note: Conversion rate used for July 2021 is Rs. 1 = US$ 0.013

References: Media reports, press releases, Press Information Bureau (PIB), Boston Consulting Group, International Data Corporation.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.