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 stood second among all nations in the global consumer confidence
index with a score of 128 points for the quarter ending June 2016, after
Philippines (132).

Further, in the discretionary spending category, 65 per cent respondents from

India indicated the next 12 months as being good to buy, thus ensuring once
again that India leads the global top 10 countries for this parameter during the
quarter.

Global corporations view India as one of the key markets from where future
growth is likely to emerge. The growth in Indias consumer market would be
primarily driven by a favourable population composition and increasing
disposable incomes.

A recent study by the McKinsey Global Institute (MGI) suggests that if India
continues to grow at the current pace, average household incomes will triple over the
next two decades, making the country the worlds fifth-largest consumer economy by
2025, up from the current 12th position.

Indias robust economic growth and rising household incomes are expected to
increase consumer spending to US$ 3.6 trillion by 2020#. The maximum
consumer spending is likely to occur in food, housing, consumer durables,
and transport and communication sectors. The report further stated that
India's share of global consumption would expand more than twice to 5.8 per
cent by 2020.

Market size

The growing purchasing power and rising influence of the social media have enabled
Indian consumers to splurge on good things. The Indian consumer sector has grown
at an annual rate of 5.7 per cent between FY2005 to FY 2015. Annual growth in the
Indian consumption market is estimated to be 6.7 per cent during FY2015-20 and 7.1
per cent during FY2021-25.

A study by US-based networking solution giant CISCO, reveals that in India,

the second-largest smartphone market globally, the number of smartphones is
expected to grow strongly to over 650 million by 2019.

India continues to witness high rate of mobile phone subscriptions. Indian

smartphone shipments increased 28.8 per cent in 2015 to reach 103.6 million,

thus crossing the 100 million mark, and becoming one of the fastest growing
smartphone markets in Asia Pacific region.

Smartphone shipments rose 17 per cent in April-June 2016 quarter, to 27.5

million. According to CISCOs Visual Networking Index (VNI) global mobile
data traffic forecast for 201419, in India, one of the world's fastest growing
Internet market, the number of tablets is estimated to reach more than 18
million by 2019.

Investments

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

Amazon India has opened six new fulfilment centres across Chennai, Coimbatore, Delhi, Jaipur and Mumbai,
which will open up 5.5 million square feet of storage space for sellers.

Panasonic Corporation plans to set up a new manufacturing plant for refrigerators in India with an investment
of Rs 250 crore (US$ 37.58 million), and also invest around Rs 20 crore (US$ 3 million) on an assembly unit
for lithium ion batteries at its existing facility in Jhajjar.

Massimo Dutti, a premium fashion brand from Spain offering sophisticated womenswear, menswear, footwear
and accessories, has entered India by opening its first store at the Select Citywalk mall in New Delhi.

New Balance, a US-based sportswear brand, has forayed into the Indian market by opening its first outlet in
DLF Mall of India in Noida and plans to set up 50 new stores across the country in the next three years.

Neil Barrett, one of the leading Italian fashion brands, has forayed into the Indian market by establishing its
retail presence through an exclusive partnership with Fervour, a multi-brand boutique that stocks international
designer brands.

Havells India Limited, one of the top Indian consumer electrical equipment producer, plans to set up a new
manufacturing unit near Bengaluru by making an investment of Rs 1,059 crore (US$ 154.46 million).

ITC Ltd has unveiled three major projects in West Bengal which include two integrated consumer goods
manufacturing facilities in Uluberia (400,000 sqft) and Panchla (800,000 sqft).

Bosch & Siemens, the largest manufacturer of home appliances in Europe, plans to manufacture more
products in India in the next three years, led by rise in demand for premium home and kitchen appliances.

San Francisco-based Fitbit Inc., a fitness-tracking device maker, has launched its fitness wristbands across
300 towns in India and expects the country to be among its top five markets in next two years, with increasing
demand for health monitoring devices in the country.

Italian premium apparel and denim brand GAS has planned to form a joint venture company with Reliance
Brands for consolidation and expansion of its business in India.

Government Initiatives

The Government of India has allowed 100 per cent Foreign Direct Investment (FDI)
in online retail of goods and services through the automatic route, thereby providing
clarity on the existing businesses of e-commerce companies operating in India.

With the demand for skilled labour growing among Indian industries, the
government plans to train 500 million people by 2022 and is also encouraging
private players and entrepreneurs to invest in the venture. Many
governments, corporate and educational organisations are working towards
providing training and education to create a skilled workforce.

In the Union Budget 2016, the government has announced various tax sops and duty
cuts for intermediary products to help increase local manufacturing and reduce
import dependency. The government removed duties on various items such as
components for microwaves, LCD fabrication units, charger, battery, wired speaker,
headsets, broadband modems, set-top boxes and CCTV camera. Depending on the
product category, various duties such as special additional duty, countervailing duty
and basic customs duty have been reduced in the range of four to 12.5 per cent.
Union Cabinet reforms like implementation of the Goods and Services Tax (GST)
and Seventh Pay Commission are expected to give a boost to consumer durable
sector in India during 2016.
Road Ahead

The food services market in India is expected to expand at a CAGR of over 12 per
cent through 2020##, primarily driven by increasing disposable income, changing
lifestyle, and changing tastes and preferences of consumers. Another major factor
propelling the demand for food services in India is the growing youth population,
primarily in the countrys urban regions. India has a large base of young consumers
who form the majority of the workforce and, due to time constraints, barely get time
for cooking.
India's e-commerce market is expected to reach US$ 220 billion in terms of gross
merchandise value (GMV) and 530 million shoppers by 2025**, led by faster speeds
on reliable telecom networks, faster adoption of online services and better variety as
well as convenience.
Further, the M2M modules market in India is expected to exceed US$ 4.4 billion by
2020@@, as India has become one of the fastest growing markets for M2M
modules in Asia-Pacific (APAC).
Research firm Nielsen projected that rural Indias FMCG market will surpass the US$
100 billion mark by 2025. Online portals are expected to play a key role for
companies trying to enter the hinterlands. The Internet has contributed in a big way,
facilitating a cheaper and more convenient means to increase a companys reach.
Exchange Rate Used: INR 1 = US$ 0.0149 as on September 28, 2016

References: Media reports, press releases, Press Information Bureau (PIB), Union
Budget 2016-17
Notes: # - According to a report by Boston Consulting Group (BCG) and the
Confederation of Indian Industry (CII), * - According to an Associated Chambers of
Commerce & Industry of India (ASSOCHAM) report released in January 2016, @ According to a recent report by the Confederation of Indian Industry (CII) and
Deloitte, ## - According to a TechSci Research report, "India Food Services Market
Forecast & Opportunities, 2020", ** - as per a report by Bank of America Merrill
Lynch (BofA-ML), @@ - According to the report titled "India Machine-to-Machine
(M2M) Modules Market Opportunities & Forecast, 2020", ! - as per a study by
Assocham, July 201

Consumer durables revenues have been growing at a healthy pace

In 2015, revenue from consumer durables sector in India stood at US$ 9.7 billion, which further increased to US$ 12.5 billion
in FY16.

Consumer durable market expected to grow at CAGR of 13 per cent from FY05 to FY20.

Around two third of the total revenue is generated from urban population and rest is generated from rural population.

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Latest update: January, 2017