Rejoice! Consumer spending in India poised for explosive growth, says CII-BCG report

14 Feb,2012

By A Correspondent

 

The Boston Consulting Group (BCG) and The Confederation of Indian Industry (CII) jointly released a study titled The Tiger Roars: An In-Depth Analysis of How A Billion-Plus People Consume. “This report examines the shape and size of the consumption expenditure of India , and its expected evolution over the next decade, in detail. While India’s robust consumption growth presents attractive opportunities for companies, its unique diversity and variety makes it a challenge to capture these opportunities. This report presents a framework and approach on how to de-average the opportunity to better segment consumers and effectively understand their buying preferences,” said Abheek Singhi, Leader of the Consumer & Retail Practices, BCG India and co-author of the report.

 

Buoyed by the rising household income, coming-of-age of a new generation, and other socio-economic forces, overall consumer spending in India is likely to expand 3.6 times-from $991 billion in 2010 to $3.6 trillion by 2020. The projected 14 per cent growth rate is much faster than the anticipated annual global growth of 5.5 per cent-and even faster than the anticipated growth of 9 per cent in emerging economies. By 2020, India will constitute 5.8 per cent of global consumption – more than double the 2.7 per cent it now represents.

 

Despite the current global economic environment, India continues to march along a robust growth path. With the recent regulatory changes, increasing consumption levels and changing consumer preferences, the FMCG and retail sectors are standing at the point of inflexion,” said Amitabh Mall, Partner & Director, BCG India .

 

India has billion-plus consumers spanning all income segments. The income pyramid is real but does only a partial job of explaining consumer attitude and behaviour. This report provides a definitive view of the income segmentation and more importantly uses other parameters of location, education and occupation to define the seven segments in India :

  • Professional Affluent (2 per cent of households)
  • Traditional Affluent (4 per cent of households)
  • Urban Aspirers (8 per cent of households)
  • Rural Aspirers (6 per cent of households)
  • Large Town Next Billion (6 per cent of households)
  • SmallTownand Rural Next Billion (24 per cent of households)
  • Strugglers (50 per cent of households)

 

Food, housing & consumer durables and transport & communication are expected to be the Top 3 categories, accounting for 65 per cent of consumption in 2020. The Professional Affluents are expected to dominate consumption in 2020, accounting for 26 per cent of total consumption expenditure, up from 16 per cent in 2010. By contrast, spending by struggler households will decline from 26 per cent in 2010 to 11 per cent in 2020.

 

“The roar of the Tiger is a fitting metaphor for consumer spending in India . Consumer spending in India will continue to roar, but the companies that try to capture it may not be so fortunate. India is a big and growing consumer market, but not an easy one. Understanding the size and shape of the prize and where it is hidden in the challenging fabric of India are the first steps to capturing it,” concluded Mr Singhi.

 

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