Asia's Top 1000 brands: India market snapshot: growing demand, rural transformation
Nielsen provides insight into India’s economic outlook and retail backdrop
Jun 12, 2017 05:04:00 AM | Article | Nielsen
“One state, many countries” is a term that is often used to illustrate India’s diversity and complexity. The world’s second most populated country, India is forecast to expand a further 11 percent to 1.42 billion people by 2025, just behind China, where forecast population growth is just 3 percent for the same period.
India’s rural population will remain the backbone of the country over the coming years, accounting for 63 percent in 2025 compared to 67 percent in 2015. Rising rural incomes, improved education and greater accessibility to services thanks to increased investment in rural infrastructure are driving consumer demand across a range of categories. Increasingly savvy and informed rural consumers aspire to own branded products and services used by their urban counterparts. India’s big cities will also play a crucial role in the consumer landscape – mega cities of 10 million people or more are growing by 57 percent compared to average urban growth of 27 percent. Inter-connectivity between smaller cities will also improve creating larger corridors of connected urbanized areas or urban agglomerations.
India is a young country with 65 percent of the population aged under 30 years. Connectivity is burgeoning and it is estimated there will be more than 700 million smartphones in India by 2020. Connectivity allows for personalisation and mass marketing will be a thing of past. Companies must look at commonalities on a more personalised level to build future strategies.
India’s average GDP growth throughout 2016 was just behind China, showcasing a strong and resilient economy. Growth dipped in Q4 to 5.7 percent however, as the government demonetised 500 and 1000 rupee notes on November 8 leading to a temporary cash crunch with over 80 percent of all currency notes suddenly withdrawn from circulation.
Although the demonetisation fallout was felt broadly across the economy, the FMCG sector managed to buck the trend, posting solid growth of 11 percent in the fourth quarter on the back of strong consumer confidence, high agricultural yields and controlled inflation. Growth was largely driven by consumption, which was up 8 percent.
It is widely anticipated that the Government’s demonetisation play will push consumers to adopt and embrace digital payment methods and ease them into cashless transactions. While demonetisation may create a short term challenge for e-commerce companies currently are heavily dependent on cash-on-delivery payment terms, in the medium to long term a movement to digital payment methods will spur the growth of the overall online retail industry.
Looking ahead, India’s recently announced 2017 budget holds some promise for consumers and brands. Tax relief will be welcomed by smaller local brands and the middle class, and is expected to boost consumption. The government has also indicated it will increase rural and farm spending by 24%, which will likely have flow-on effects for consumer spending from this sector. The nationwide rollout of the goods and services tax (GST), scheduled for July, is expected to lead to increased private investment and infrastructure spending, which in turn is anticipated to stimulate further economic growth.
(Sources: All population and urbanisation figures come from United Nations Urbanisation Prospects 2015. This article first appeared on CampaignAsia.com)