India on track as one of the fastest-growing markets despite global slowdown
India's strong domestic market is helping to shelter the country from the global economic slowdown and helping ensure it is on track to be one the fastest growing markets globally. The Drum spoke to Prasanth Kumar, chief executive officer of GroupM South Asia for insights into how India is performing.
The India growth story
The Indian advertising industry is predicted to experience a 15.5% increase in ad spend this year, according to GroupM's annual This Year Next Year report. The 2023 TYNY report predicts global advertising spend to grow 5.9% in 2023, with India set to be the fastest-growing market in the top 10 markets globally.
While India’s share in the overall ad spend is 2.1%, behind the US (38%), China (17%), Japan (6%), the United Kingdom (6%) and Germany (4%), the nation's overall GDP growth rate of 6.8% and its shelter from the broader economic uncertainty is helping to drive optimism in the market.
What are the growth drivers?
India is a standout market when you consider the overall tough global economic scenario. With many of the bigger markets looking at an overall slowdown, the India story is a standout.
Matching the economy’s buoyancy, the advertising expenditure growth in India is also on a high, says GroupM's South Asia chief executive Prasanth Kumar. "India has been insulated from the global shocks because of its domestic consumption potential.” A significant factor for this growth is the fact that the Indian economy is 65% inward-focused, he adds.
Fiscal policy drivers, such as improved investments in digital infrastructure, a growing labor force and India's increasingly attractive export market, partly explain its strong growth. Alongside these robust macro-economic conditions, India's digital ad market is booming, attracting 56% of all advertising spend and is growing 20% over the last year.
India's digital and fintech sectors
Interestingly, the sector that is most impacted by the global slowdown is India's IT category, which doesn’t advertise in India. Meanwhile, high competitive intensity in the CPG industry is helping to boost advertising spend.
The huge growth potential for India's diverse tier-two and tier-three markets, which remain under-penetrated market for online services, are helping drive ad spend, according to Kumar.
Going forward, the OCEN (open credit enablement network) will help fintech players assess their borrowers and collaborate better with banks and NBFCs. This, alongside, overall regulatory clarity within the gaming sector will also help drive ad spend, he adds.
The SME sector is no longer small
The sharp growth in the SME business is also a high contributor to this growth story, Kumar shares. Digital native brands in this space mostly utilize platforms and promote their content and self-serve platforms enable advertising at low cost and easy credit.
SMEs here would include the emerging digital businesses that are small in size but have high growth potential and the long tail of smaller offline advertisers who are now brought under the fold of advertising with commerce marketplace platforms.
An interesting point about the Indian growth story according to Kumar is that broadly, 60% of advertising spend in India is tracked and measured (mostly on TV, print, and radio). The remaining 40% does not get tracked due to its highly fragmented nature. With the increasing share of the digital pie, that is changing gradually.
Overall, despite the macroeconomic volatility and global slowdown, which has impacted ad spending, as per Kumar, “the Indian economy seems to be ready to weather these challenges and grow in the coming years.”