Urban Market

Introduction

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.

A ‘new wave’ of non-metro cities including 10 high potential cities like Bhopal and Patna, and 30 emerging cities like Agra and Amritsar among others, are catching up with the eight metro cities of India in terms of consumption, media penetration and investment opportunities, according to a report by Ernst and Young.

Market Size

India’s urban population would increase to 40.7 per cent of the population to 600 million by 2030, as against 28 per cent in 2001 as per Census 2001.

Investments/Developments

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.

• South Korean consumer electronics major, LG, is planning to target India's premium segment by introducing premium products under its new brand, 'LG Signature' in India by July 2017.
• Future Group is planning to open 80 new stores under its affordable fashion format, Fashion at Big Bazaar (FBB), and is targeting sales of 230 million units of garments by March 2018, which is expected to grow to 800 million units by 2021, said Mr Kishore Biyani, Chief Executive Officer (CEO), Future Group.
• Amway, India’s largest company in the Rs 7,500 crore (US$ 1.12 billion) direct-selling market, plans to invest Rs 400 crore (US$ 60 million) over the next five years to expand its product portfolio and open 50 ‘express’ stores in top 20 cities of India, in addition to strengthening its e-commerce website.
• The Government of Japan is very much interested in urban development initiatives of the Government of India and has decided to be associated with development of cities like Chennai, Ahmedabad and Varanasi as smart cities in the country.

Government Initiatives

• In the Union Budget 2017-18, the Government of India has allotted Rs 9000 crore (US$ 1.34 billion) for AMRUT scheme and Smart Cities mission.
• The Government of India has unveiled a new Urban Development strategy for the next 20 years, aimed at development of rural and urban areas, housing for all urban poor and ensuring gender equity in the country among other objectives.
• The Ministry of Housing and Urban Poverty Alleviation has sanctioned the construction of 84,460 more affordable houses in five states for urban poor under the Pradhan Mantri Awas Yojana (Urban) scheme, bringing the tally to 1.09 million affordable houses that had been approved during 2015 under the scheme.
• The Ministry of Urban Development plans to introduce a new policy framework for resource mobilisation through Value Capture Financing (VCF), which would enable state and city governments to raise funds by tapping a share of increase in value of land and other properties, to finance ongoing urban infrastructure expansion.
• The Government of India plans to introduce a new Green Urban Transport Scheme with a central assistance of about Rs 25,000 crore (US$ 3.75 billion), aimed at boosting the growth of urban transport along low carbon path for substantial reduction in pollution, and providing a framework for funding urban mobility projects at National, State and City level with minimum recourse to budgetary support by encouraging innovative financing of projects.

Road Ahead

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$ 0.0155 as of April 17, 2017.

References: Media Reports, Press releases, TSMG report, MGI report, Press Information Bureau (PIB), Union Budget 2017-18

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