Consumption in India is set to triple to $4 trillion by 2025 as rising affluence drives changes in consumer behaviors and spending patterns that have big implications for companies, according to a report released today by The Boston Consulting Group’s (BCG) Center for Customer Insight (CCI), The New Indian: The Many Facets of a Changing Consumer. Nominal year-over-year expenditure growth of 12% is more than double the anticipated global rate of 5% and will make India the third-largest consumer market by 2025.
The shape of this growth will be influenced by the following factors:
The elite and affluent income segments will constitute 40% of all spending by 2025; for the first time, the wealthy will represent the largest consumption segmen
Emerging cities (those with populations of less than 1 million) will be the fastest growing and will constitute one-third of total consumer spending by 202
Three-fourths of all households will be nuclear familie
Digital channels will influence 30% to 35% of all retail sales by 2025 and 8% to 10% of retail spending will be onlin
“India’s consumer market is poised for fundamental change,” said Nimisha Jain, a BCG partner and report coauthor. “As the consumer market continues to grow and evolve, companies will need to shed conventional wisdom, try multiple business models simultaneously, and be prepared for rapid change internally to adapt to changing consumer needs and behaviors.”
Among the factors that will shape consumption is India’s unique pattern of urbanization, in which emerging cities are the fastest growing. About 40% of India’s population will be living in urban areas by 2025, and city dwellers will account for more than 60% of consumption. Expenditures in these cities are already rising by nearly 14% a year, while consumer spending in India’s biggest cities is increasing at about 12% a year. Consumers in these cities behave differently from big-city consumers. They have a strong value-for-money orientation, significant local-culture affinity, and a more conservative financial outlook.
Another important trend is shifting family structures. The extended Indian joint family has given way to nuclear households, (a couple or a single person with or without children). The proportion of nuclear households, which has been on the rise during the past two decades, has reached 70% and is projected to increase to 74% by 2025. This ongoing shift is significant to marketers because nuclear families spend 20% to 30% more per capita than joint families.
“A set of emerging social trends could reshape consumption patterns significantly,” said Abheek Singhi, a BCG senior partner and report coauthor. “These include more—and better educated—women taking their rightful place in society, greater pride in being Indian, and increasing time compression, each of which will drive exponential growth in various categories differently.”
BCG CCI’s most recent consumer survey in India included 10,000 consumers in 30 locations nationwide and studied consumption in more than 50 categories. The research found that the classic S-curve growth pattern does not always hold true and that different categories are exhibiting very different growth trajectories. It also shows a steady shift in consumers’ aspirations and spending behaviors in certain categories. For example, immediate gratification is becoming more important than asset creation. The biggest desires of aspirer households used to be to own a house and a car; today, many more of these consumers want to take international vacations. Similarly, affluent households are becoming comfort seekers, and they are willing to pay for it.
In addition, the internet is an increasingly pervasive factor in India’s commerce, and its influence will only expand. Online spending is taking off: in the past three years, the number of online buyers has increased sevenfold to 80 million to 90 million. Digital’s influence on broader consumer spending is significant and growing rapidly. Digitally influenced spending is currently about $45 billion to $50 billion a year, and that figure is projected to increase more than tenfold to $500 billion to $550 billion—and to account for 30% to 35% of all retail sales—by 2025. As a result, omnichannel interaction is more and more important, but its significance varies by category. Consumers’ purchase pathways also are increasingly complicated.
“Already, a rising number of consumers in all segments are using the internet as their first port of call in framing and driving their purchase decisions,” said Kanika Sanghi, a BCG principal and report coauthor. “Our research found that about 70% of those who have access to the internet go online to make informed purchase decisions. As consumers get more comfortable with digital capabilities, their usage patterns exhibit growth that belies age and other demographic variables.”
several mutual fund advisors, the last few months have seen a large number of non-resident Indians (NRIs) queuing up to invest in Indian mutual funds
Neeraj Chauhan, CEO of The Financial Mall was quoted by Economic Times as saying, "The number of NRI clients in our client base is on a rise recently. This is mostly because of the strong Indian economy and the great show by Indian stock markets and the mutual fund industry.""As per mutual fund advisors, a slump in the real estate sector is the prime most factor which has contributed towards Indians settled abroad exploring alternate avenues of investments, with mutual funds offering one of the safest and profitable modes of investment
"NRI investors quit real estate sector as it was not paying off. Now, the gears have shifted to mutual funds," says Puneet Oberoi, a Delhi-based Certified Financial Planner
According to Oberoi, NRIs don't consider investing directly in stocks as safe so take the mutual fund route which is a comparatively safer option, although funds too are subject to market risks
According to AMFI data Indian mutual fund industry which has been growing at a rapid pace lately, manages a record 18 trillion rupees. Besides, lower interest rates being offered by bank's has also encouraged people to invest in mutual funds
"Moreever, another reason for increasing investments from NRIs in mutual funds is the political stability in the country. The Modi government which is in a majority at the Centre has been giving positive vibes to foreign investors. On the contrary, the instability that has crept into the Unites States after President Donald Trump's travel ban has also worked in India's favour
Chauhan said, "NRIs from USA and UAE are now in constant fear of having to leave the respective countries anytime. This is also a factor that they are looking towards India for investments."
Source: Meri News
The automobile sector of India is one of the largest in the world and accounts for over 7.1 per cent of India’s GDP. It also contributes to nearly 22 per cent of the nation’s manufacturing GDP. The sector was first opened to foreign direct investment (FDI) in the year 1991 amid the liberalization of the Indian economy and has come a long way since.
The industry produced a total of 23.96 million vehicles in April-March 2015, registering a growth of 2.58 per cent over the same period last year. The country is also currently the 6th largest market in the world for automobiles and is expected to become the world's third-biggest car market by the year 2020. As per the Automotive Components Manufacturers Association of India (ACMA), the world standings for the Indian automobile sector are as follows:
• Largest tractor manufacturer
• 2nd largest two wheeler manufacturer
• 2nd largest bus manufacturer
• 5th largest heavy truck manufacturer
• 6th largest car manufacturer
• 8th largest commercial vehicle manufacture
REASONS TO INVEST
· By 2020, India is expected to be the third largest automotive market by volume in the world. Tractor sales in the country are expected to grow at Compound Annual Growth Rate (CAGR) of 8-9% in the next five years, enhancing India's market potential for international brands.
· Two-wheeler production has grown from 8.5 million units annually to 15.9 million units in the last seven years. Significant opportunities exist in rural markets.
· The emergence of large automotive clusters in the country: Delhi-Gurgaon-Faridabad in the north, Mumbai-Pune-Nashik-Aurangabad in the west, Chennai- Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east.
· Global car majors have been ramping up investments in India to cater to growing domestic demand. These manufacturers plan to leverage India's competitive advantage to set up export-oriented production hubs. A Research & Development (R&D) hub: strong support from the government in the setting up of National Automotive Testing and R&D Infrastructure Project (NATRiP) centers. Private players such as Hyundai, Suzuki, and General Motors are keen to set up an R&D base in India.
· Electric cars are likely to be a sizeable market segment in the coming decade.
100 per cent Foreign Direct investment (FDI) is allowed under the automatic route in the auto sector, subject to all the applicable regulations and laws.
India is fast on its way to becoming the primary global automobile manufacturer. The government of India is more than willing to lead this charge and assist this sector in every way to help it achieve its full potential.