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, with spending anticipated to more than double by 2025.

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 favourable population composition and increasing disposable incomes.

Per capita GDP of India is expected to reach US$ 3,273.85 in 2023 from US$ 1,983 in 2012. The maximum consumer spending is likely to occur in food, housing, consumer durables, and transport and communication sectors.

Market Size

• The growing purchasing power and rising influence of the social media have enabled Indian consumers to splurge on good things.
• Indian appliance and consumer electronics (ACE) market reached Rs 2.05 trillion (US$ 31.48 billion) in 2017. India is one of the largest growing electronics market in the world. Indian electronics market is expected to grow at 41 per cent CAGR between 2017-20 to reach US$ 400 billion.
• India was the world’s third largest smartphone market in 2017 with smartphone shipments growing 14 per cent year-on-year to 124 million units.

Investments

According to the data released by the Department of Industrial Policy and Promotion (DIPP), the electronics sector attracted foreign direct investment (FDI) worth US$ 1.97 billion between April 2000 and June 2018. The S&P BSE Consumer Durables Index has grown at 20 per cent CAGR between 2010-17.

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

• India is now the world’s second largest mobile phone manufacturer with presence of 120 factories as of July 2018.
• In July 2018, Samsung announced an investment of Rs 5,000 crore (US$ 745.82 million) for expansion of manufacturing capacity to 120 million from 68 million devices at its Noida plant in India.
• Intex Technologies will invest around Rs 60 crore (US$ 9.27 million) in 2018 in technology software and Internet of Things (IoT) startups in India in order to create an ecosystem for its consumer appliances and mobile devices.
• Micromax plans to invest US$ 89.25 million by 2020 for transforming itself into a consumer electronics company.

Government Initiatives

• A new Consumer Protection Bill has been approved by the Union Cabinet, Government of India that will make the existing laws more effective with a broader scope.
• The mobile phone industry in India expects that the Government of India's boost to production of battery chargers will result in setting up of 365 factories, thereby generating 800,000 jobs by 2025.
• The Union Cabinet has approved incentives up to Rs 10,000 crore (US$ 1.47 billion) for investors by amending the M-SIPS scheme, in order to further incentivise investments in electronics sector, create employment opportunities and reduce dependence on imports by 2020.
• The Ministry of Electronics and Information Technology has revised National Policy on Electronics 2012 (NPE) to focus on increasing competitiveness, innovation, R&D, promoting/incentivising exports in ESDM.
• The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) under the automatic route in Electronics Systems Design & Manufacturing sector. FDI into single brand retail has been increased from 51 per cent to 100 per cent; the government is planning to hike FDI limit in multi-brand retail to 51 per cent.

Road Ahead

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

Exchange Rate Used: INR 1 = US$ 0.0149 as of Q1 FY19

References: Media reports, press releases, Press Information Bureau (PIB), Union Budget 2017-18, 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.