Thursday, July 9, 2009

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.

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