India Consumer Insights
India has emerged as the fastest growing economy in the world. It is expected to be one of the top three economic powers of the world over next 10-15 years, backed by its strong democracy and partnerships. World Bank estimated that India’s GDP is expected to grow at 7.3 percent in 2018-19.
India has retained its position as the third largest startup base in the world with over 4750 technology startups.
India’s labour force is expected to touch 160-170 million by 2020, based on rate of population growth, increased labour force participation, and higher education enrolment, among other factors. India’s foreign exchange reserves were US$ 393.29 billion in the week up to December 21, 2018, according to data from the RBI.
With the improvement in the economic scenario, there have been various investments in various sectors of the economy. The M&A activity in India increased 53.3 per cent to US$ 77.6 billion in 2017 while private equity (PE) deals reached US$ 24.4 billion.
Some of the important recent developments in Indian economy are as follows:
- Exports from India increased 4.32 per cent year-on-year to US$ 92.33 billion in April-May 2019.
- Nikkei India Manufacturing Purchasing Managers’ Index (PMI) stood at 51.40 in July 2019, showing expansion in the sector.
- Mergers and Acquisitions (M&A) activity in the country has reached US$ 41.6 billion in first half of 2019 (Jan-June).
- Income tax collection in the country reached Rs 2.50 lakh crore (US$ 35.88 billion) between April-November 2018.
- In the first six months of 2019, eight companies held IPOs, raising as much as Rs 5,509 crore (US$ 0.79 billion).
- India’s Foreign Direct Investment (FDI) equity inflows reached US$ 436.47 billion between April 2000 and June 2019, with maximum contribution from services, computer software and hardware, telecommunications, construction, trading and automobiles.
- India’s Index of Industrial Production (IIP) rose 2 per cent year-on-year June 2019.
- Consumer Price Index (CPI) inflation rose moderated to 3.15 per cent in July 2019 from 3.18 per cent in June 2019.
- Around 10.8 million jobs were created in India in 2017.
- India has improved its ranking in the World Bank’s Doing Business Report by 23 spots over its 2017 ranking and is ranked 77 among 190 countries in 2019 edition of the report.
- India is expected to have 100,000 startups by 2025, which will create employment for 3.25 million people and US$ 500 billion in value, as per Mr. T V Mohan Das Pai, Chairman, Manipal Global Education.
- The World Bank has stated that private investments in India is expected to grow by 8.8 per cent in FY 2018-19 to overtake private consumption growth of 7.4 per cent, and thereby drive the growth in India’s gross domestic product (GDP) in FY 2018-19.
- India is expected to retain its position as the world’s leading recipient of remittances in 2018, with total remittances touching US$ 80 billion, according to World Bank’s Migration and Development Brief.
- A total of Rs 14.34 lakh crore (US$ 196.94 billion) will be spent for creation of livelihood and infrastructure in rural areas.
- Budgetary allocation for infrastructure is set at Rs 5.97 lakh crore (US$ 81.99 billion) for 2018-19. All-time high allocations have been made to the rail and road sectors.
- In June 2019, India’s unemployment rate is 7.91 per cent.
- Numerous foreign companies are setting up their facilities in India on account of various government initiatives like Make in India and Digital India.
Some of the recent initiatives and developments undertaken by the government are listed below:
- In India, Atal Innovation Mission (AIM), flagship initiative of NITI Aayog, launched the Atal Community Innovation Centre (ACIC) program in NITI Aayog which aims at spurring community innovation in underserved and unserved areas of the country.
- National Institute for Transforming India (NITI) Aayog released a strategic document titled ‘Strategy for New India @75’ to help India become a US$ 4 trillion economy by FY23.
- The Government of India is going to increase public health spending to 2.5 per cent of GDP by 2025.
- For implementation of Agriculture Export Policy, government has approved an outlay Rs. 206.8 crore (US$ 29.59 million) for 2019, aimed at doubling farmers income by 2022.
- Government is planning to launch Bharatcraft portal, an e-commerce marketing platform to market and sell the products.
- Under the Pradhan Mantri Awas Yojana (Urban), government have been sanctioned Rs. 4.83 lakh crore (US$ 69.10 billion) for the construction of 81 lakh houses of which construction about 47 lakh houses has started.
- Village electrification in India was completed in April 2018.
- Around 26.02 million households have been electrified as on 31st March 2019 under the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA).
- Prime Minister’s Employment Generation Programme (PMEGP) will be continued with an outlay of Rs 5,500 crore (US$ 755.36 million) for three years from 2017-18 to 2019-20, according to the Cabinet Committee on Economic Affairs (CCEA).
- The target of an Open Defecation Free (ODF) India will be achieved by October 2, 2019 as adequate funding is available to the Swachh Bharat Mission (Gramin), according to Ms. Uma Bharti, Minister of Drinking Water and Sanitation, Government of India.
- The Government of India has decided to invest Rs 2.11 trillion (US$ 32.9 billion) to recapitalize public sector banks over the next two years and Rs 7 trillion (US$ 109.31billion) for construction of new roads and highways over the next five years.
- As per the Union Budget 2019-20, public sector banks (PSBs) will be provided with a capital infusion of Rs. 70,000 crores (US$ 10.02 billion), allowing NBFCs to raise foreign debt.
- The mid-term review of India’s Foreign Trade Policy (FTP) 2015-20 has been released by Ministry of Commerce & Industry, Government of India, under which annual incentives for labour intensive MSME sectors have been increased by 2 per cent.
- Under the scheme Pradhan Mantri Gram Sadak Yojana (PMGSY-III), government plans to spend Rs 50,250 crores (US$ 7.19 billion) to build roads to boost rural connectivity.
- India’s gross domestic product (GDP) is expected to reach US$ 6 trillion by FY27 and achieve upper-middle income status on the back of digitization, globalization, favourable demographics, and reforms.
- India’s revenue receipts are estimated to touch Rs 28-30 trillion (US$ 385-412 billion) by 2019, owing to Government of India’s measures to strengthen infrastructure and reforms like demonetization and Goods and Services Tax (GST).
- India is also focusing on renewable sources to generate energy. It is planning to achieve 40 per cent of its energy from non-fossil sources by 2030 which is currently 30 per cent and also have plans to increase its renewable energy capacity from to 175 GW by 2022.
- India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers.
Future of Consumption in Fast Growth Consumer Market: India
The following 10 mega trends for India in 2030 can help businesses and policy leaders envision the India of the future. The trends draw upon the research and consumer survey conducted by the World Economic Forum and Bain for the Insight Report.
Over the next decade, consumption in fast-growth consumer markets such as China, India and Southeast Asia will be reshaped by the Fourth Industrial Revolution and more than one billion first-time consumers.
The Future of Consumption in Fast-Growth Consumer Markets, a project in collaboration with Bain & Company, focuses on the emerging markets that comprise more than 40% of the world’s population. After studying China in 2017, for 2018 it turned its attention to India.
India is one of the fastest-growing economies in the world. By 2030, it is on course to witness a 4x growth in consumer spend. It will remain one of the youngest nations on the planet and will be home to more than one billion internet users. The new Indian consumer will be richer and more willing to spend, and unlike her predecessors, she will have very specific preferences.
1. The Indian middle class will truly come into its own
By 2030, India will move from being an economy led by the bottom of the pyramid, to one led by the middle class. Nearly 80% of households in 2030 will be middle-income, up from about 50% today. The middle class will drive 75% of consumer spending in 2030.
2. Upward income mobility will drive growth across all consumption categories
As 140 million households move into the middle class and another 20 million move into the high-income bracket, they will spend 2-2.5x more on essential categories (food, beverages, apparel, personal care, gadgets, transport and housing) and 3-4x more on services (healthcare, education, entertainment and household care). Upper-middle-income and high-income entrants will drive a 15-20% increase in the ownership of durables (washing machines, refrigerators, TVs and personal vehicles).
3. Half the incremental rupees will go into buying more, the rest nearly equally into buying better and buying new
Half the incremental consumer spend by 2030 will be simply to buy more of the products and services being consumed today. Affordable options will continue to be important. The remaining half will be split nearly equally on upgrading to premium offerings and including new variants in existing routines, such as adding organic food items and a new skincare regime, or adopting app-based ride-sharing. Premiumization and category addition will drive a significant share of incremental spend on eating (food and beverages at home, and dining out), looking good (personal care and apparel) and staying connected (cellphones, data packs and gadgets).
4. Aspirations are fast converging across urban and rural India, and better access will transform this intent into actual spend
The internet and smartphones have significantly bridged the information divide between consumers in urban and rural India. Beyond the top 40 cities, developed rural and small urban towns already have a very similar income profile. At a given income level, both these consumer groups desire a similar standard of living, aspire to a similar set of brands and are equally comfortable with technology-enabled consumption. Rural India’s strong desire to consume is presently constrained by poor access to roads, power, organized retail and financial services. Future efforts to improve physical and digital connectivity, and the use of innovative distribution channels, will enhance well-being and unlock the true consumption potential of rural India.
5. Millennial and Generation Z preferences will significantly shape the market
These consumers will be able and willing to spend more but will also be more discerning. In 2030, 77% of Indians will be born in the late 1980s and onwards. This generation of consumers will have had exposure to more product and service options than their predecessors. These youngest Indians already exhibit the greatest willingness to increase spending over the next 10 years, but they are also highly discerning about what they consider “best in class” offerings in every consumption category, from apparel to cars. Businesses will have richer, more willing buyers, but these buyers will be highly informed and make very specific choices for themselves and their families.
6. Digitally influenced consumption will become the norm
“Connectedness” will drive a significant difference in preferences, even at the same income level. As many as 50-70% of the most digitally connected consumers today, across income levels, already use digital platforms for product discovery and pre-purchase research. By 2030, more than 40% of all purchases will be highly digitally influenced, up from 20-22% today.
Income and age may have been the traditional drivers of preferences, but in the future, preferences will be significantly driven by a consumer’s degree of connectedness to digital media and online platforms. At the same income level, the more “connected” consumer (by internet and smartphone) will spend well, own durables, premiumize to better products (according to her income) and be very aware of the brands that best serve her needs. Her less connected counterpart is likely to spend frugally, own few durables and continue buying more of the same.
7. India’s eternal hunt for value will aid the growth of e-commerce, ‘value for money’ brands and category extensions
Indian consumers will be willing to adopt value-for-money brands that have “just right” features and prices. India’s new consumers have aspirations to consume more (and the necessary income to fulfil this desire), but they are dispersed across tens of thousands of urban and rural towns. Asset-light e-commerce models, supported by offline partnerships and demand-aggregators, will help brands test out and reach these new markets in a cost-efficient manner. Businesses will also have an opportunity to unlock spend on new category extensions.
For instance, dining out will become a significant area of food and beverage spend (up from more than 10% today), driven by the increasing use of app-based meal deliveries to replace home-cooked meals, especially by upper-middle-income and high-income working consumers. One in four of these consumers has already begun to increase their spend on entertainment to subscribe to digital video-streaming services. Affordable and innovative options can unlock massive incremental spend and establish new variants of consumption in many existing categories.
8. Technology-enabled new business models will leverage inherent comfort with ‘usership’ and the desire for increased convenience and well-being
As the original usership economy, India has lessons for the world. Indians have traditionally used public transport services over owned vehicles, and furnished homes using low-cost second-hand furniture rather than new purchases. Digital platforms for renting and sharing will speak to this usership mindset, as well as to the tech-savviness of future consumers. Subscription models, much like today’s Bombay Shaving Club, Amazon India Grocery Pantry and Fab Bag, will serve the value-conscious Indian keen to access new brands and products for a small recurring spend. Digital platforms for health and learning will fulfil the Indian consumer’s prime aspiration – the desire for greater well-being for themselves and their family.
9. Business, policy and civic society leaders will collectively drive an inclusive, healthy and sustainable future for India
India presents a host of exciting business opportunities in the next decade. At the same time, the next phase of India’s growth story offers stakeholders a chance to shape a path of responsible and equitable growth, from which other fast-growing markets can learn. Building on the momentum of collaborative efforts such as Skill India and Eat Right India, public-private-civic-society partnerships can help tackle the three key societal challenges facing India today: the need for skills and jobs for its working age majority; the greater inclusion of rural India; and the building of a healthy and sustainable future for its citizens and cities.
10. Firms will thrive by innovating for India and embracing a ‘founder’s mentality’
Companies will go a step beyond replicating Western models at low costs; they will localize and personalize business models and product/service offerings according to the unique preferences and constraints of their Indian consumer. In the past, companies that have sustained growth in India have been ones with an insurgent mission, frontline obsession and strong owner’s mindset. This “founder’s mentality” will be a critical capability for the future, for small and established businesses alike. Entrepreneurial and agile organizations will be best positioned to capture the full potential of consumption opportunities in the vibrant and diverse market that is India.
India in 2030 will be a playground for growth and innovation for consumer businesses – both Indian and global, established and emerging. The transformations in the Indian consumer’s income, propensity for consumption, awareness and tech-savviness will create massive opportunities. India in 2030 will also be a platform for stakeholders to shape a path of inclusive and responsible growth, for fast-growing markets across the world to follow.