Indian Consumer Market

Introduction

Indian consumer segment 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.

India hit ten-year high and stood first among the 63 nations surveyed in the global consumer confidence index with a score of 136 points for the quarter ending December 2016.

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.

India’s robust economic growth and rising household incomes are expected to increase consumer spending to US$ 4 trillion by 2025#. 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.
• By 2020, the electronics market in India is expected to increase to US$ 100 billion from US$ 28 billion in FY17. The production is expected to reach to US$ 104 billion by 2020. By 2018, the television industry in India is expected to grow to US$ 11.78 billion from US$ 9.23 billion in 2016, registering a growth of 12.97 per cent.
• 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$ 1.836 billion between April 2000 and December 2017.

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

• Chinese phone manufacturer, Xiaomi Corporation, is planning to invest about US$ 1 billion in 100 Indian start-ups over the coming five years, with an aim to make an ecosystem of apps surrounding its smartphone brand.
• Japan-based imaging major, Nikon, expects India to be one of its top five markets in the world over the coming 3-4 years as it retains its lead in the DSLR segment and expands its retail presence in India by adding 10-15 Nikon Experience Zone stores.

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

By 2025, India would rise from the 12th to the 5th largest position in the consumer durables market in the world. The consumer durables market in India is expected to reach US$ 20.6 billion by 2020. 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$ 0.015 as of March 1, 2018

References: Media reports, press releases, Press Information Bureau (PIB), Union Budget 2017-18, Boston Consulting Group, International Data Corporation.

Notes: # - According to a report by Boston Consulting Group (BCG)

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