Consumer spending in India on the rise

The Indian fast-moving consumer goods industry, consumer durables and automobiles have responded positively to the sops offered by the Finance Minister, Mr Pranab Mukherjee in the budget for 2009-10. The very nature of the measures taken such as implementation of goods and services tax (GST), removal of excise duty cuts etc. is proving to be favourable for these industries and the indices too shot up indicating improved sentiment.

Overall, these sectors reflect the socio-economic conditions in the country the most. With rural spending increasing both by the government and individuals, these sectors are likely to experience growth in the range of 10-18 per cent in the coming years and increase four times over in the next 10 years according to a recent industry research report.

Bullish rural growth plans of major fast moving consumer goods (FMCG) players are helping increase growth.

Amit Burman, Vice Chairman, Dabur India, agrees: "Rural India accounts for almost 40 per cent of the industry’s sales. The government’s decision to extend the loan waiver scheme in view of the delay in monsoons and offer subsidised loans (at 6 per cent) for farmers who have paid their dues in time would put more money in their pockets. This move would go a long way in giving the rural economy and consumerism a big boost."

Pinakiranjan Mishra, Partner & Industry Leader, Retail & Consumer Products Practice, Ernst & Young, concurs: "This means that a lot of the income in the hands of rural consumers and this will go towards buying consumer products."

According to M. S. Banga, president (Foods, HPC) of consumer products giant Unilever, the government's focus on stimulating rural demand and all the measures to put money in the hands of consumers will go a long way. "We are doing well as a nation and from here on, we can only look upwards. Consumption-led focus is a great way to get going. We must remember not many geographies are seeing the kind of growth which we are seeing," said Mr Banga.

Consumer electronic majors, such as LG, Samsung, Godrej and Philips, also expect their businesses to strengthen. These companies are working out strategies and products specifically addressing the market, apart from focussing on adding strength to their distribution network there. Samsung plans to expand its sales channel by 25-30 per cent in rural India. Meanwhile, LG has outlined plans to invest around US$ 40 million towards development of entry-level products targeted at rural markets.

Presently, the urban markets account for around 50 per cent of sales in the Rs 25,000-crore consumer electronics industry, tier-II and -III towns for 30 per cent from and rural India for the balance 20 per cent.

No wonder, the consumers are all out to buy and buy more, and enjoy spending for a change.

Indians looking forward to improving economic performances

Current events and happenings in the country are leading us to believe that a recovery of sorts is occurring, boosting the economic morale in India.

Amongst the various Indian industries that have been successful in bucking the global contagion and are showing good numbers are the Indian telecom, banking and biotechnology sectors. The country added over 8 million subscribers during May 2009, taking the total GSM subscriber base to over 30 million, registering a growth of 2.78 per cent. The country’s largest telecom operator, Bharti Airtel that reached the 100 million subscriber mark (fixed line and wireless) achieved a 2.91 per cent growth in its wireless subscriber’s base taking its total wireless subscribers’ count to 99.5 million. Vodafone-Essar, the second largest GSM operator in the country registered a 3.55 per cent growth in its subscriber market share, adding further 2.5 million subscribers.

The banking sector especially public sector banks did well enough to garner ample credit and deposits on the back of increased economic and robust market activity. In 2008-09, total advances grew at 17.3 per cent while total deposits grew by 19.8 per cent. Spending on infrastructure and the new fiscal reforms are likely to propel further growth.

Mr. Philip Kendall, Senior Sector Manager (International Biotech and Pharma) with the United Kingdom Trade and Investment arm recently observed, “India has a relatively young biotech sector and all the ingredients for growth, such as quality services and businesses”. This is indicative of the milestones that the biotech industry has begun to achieve, what with US-based and European biotech companies wanting a pie in the sector to not only grow but to also buck globally difficult times.

The textile industry has in the meanwhile found a savior in form of the newly inducted textiles Minister, Mr. Dayanidhi Maran, who stated that “considering the current developments and technological advancement, it is crucial to evolve a National Fiber Policy. My priority is to get some relief for the industry in the short term. Once the industry picks up, the rest will fall in place.”

The perfume industry is witnessing an upheaval with the entry of Giorgio Armani, one of the top luxury apparel and accessories brands, which recently launched its first ever ‘super-luxury’ range of Prive perfumes in India in collaboration with L’Oreal International. It is scheduled to open 10 outlets offering perfumes in the luxury segment across Delhi, Mumbai and Bangalore out of which six will come up by May end. The company will be selling a wide range of eighty fragrances except for its super premium Prive range in Lifestyle and Shopper’s Stop stores.