State of the Nation: Can India's economy keep pace with its aspirations and confidence?
In the latest State of The Nation, Kiran Ramamurthy, the chief operating officer at Media.Monks India explores the new India being shaped by the dreams and aspirations of a massive population and a rapidly changing media landscape.
/ Image by Kong Khawlhring from Pixabay
Rising income levels. Increased access to technology. Changing social norms. The new India is getting redefined based on these factors. And it is giving rise to newer aspirations. If there is one defining theme in India, it is that while dreams have gotten bigger, more people today than ever before have the confidence that their dreams will come true. This article explores the four key factors impacting the Indian consumer.
Greater exposure is leading to the purchase of products of higher value.
As information gets democratized and more consumers are exposed to different lifestyles and products from across the world, premium products and products that were once considered niche are getting bigger markets. Access to this information and to these products has gotten a significant push from the growing e-commerce market.
With 200 million online shoppers and the rapid growth continuing, e-commerce has also allowed consumers to research products online and upgrade from plain vanilla to value-added products. Beneficiaries of this can be seen across categories.
In-home appliances, consumers are graduating to more advanced models that offer features such as energy efficiency, smart connectivity and automation. In Fashion and clothing, consumers can now discover new fashion trends and styles and find unique and hard-to-find items that are not available in traditional brick-and-mortar stores. In Beauty and personal care, they are graduating to organic skin care products, high-end makeup, and professional haircare products.
There is a K-shaped economic recovery post-pandemic.
The sobering corollary to products of higher value finding a bigger market is the counteracting fact that there seems to be a K-shaped recovery in the post-pandemic period. The K-shaped recovery points to a certain segment of the population having the wherewithal to buy higher-priced products, while a large section of the population is going slower in consumption.
Two categories clearly show this phenomenon. If one looks at the passenger vehicle market, the sale of 4-wheelers has shown a significant recovery in 2021 and 2022, after tanking the previous two years. However, 2-wheelers which had a steeper fall in 2020, are still struggling to recover, and it looks like it will take a while to reach the pre-pandemic levels. Similarly, in the housing market, homes for the middle class and above (homes that are more than USD 43,000 in metros) are continuing to grow while lower priced homes sales are stagnant.
Clearly, the mass market will take some time to recover. The silver lining, however, is the growth that the FMCG category is witnessing, which seems to indicate that this K-curve is applicable more to discretionary and heavy spending rather than necessity-driven spending.
Increasing participation in the financial markets
The middle class and the affluent population in India are accessing the financial markets with increased speed, again an indication of the growing aspirations as they seek to grow their wealth. Financial literacy has been at the heart of this trend with initiatives by the government and private players. The most visible initiative has been an ongoing campaign by an association of Mutual Fund players to get people to adopt the category.
Digitization of the sector has made accessibility easier, and that has further fuelled adoption. The number of Demat accounts in India has grown from 7 million in 2010 to 106 million today, a 15-fold growth in just 12 years.
Even as participation in the stock market is growing, initiatives by the government is also leading to greater financial inclusion of a larger population. The Jan Dhan Yojana, which aims to increase access to banking services for the unbanked, today has close to 479 million accounts.
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The three big spending triggers
India has three big triggers for consumer spending. The festive season, the wedding season and, interestingly, the biggest cricket extravaganza, IPL. The festive season includes Dussehra and Diwali. Diwali is arguably the biggest season for consumer purchases as people consider buying new things auspicious during this period. Sales during Diwali in 2022 across online and offline were the biggest and beat pre-Covid sales comfortably.
The ‘Great Indian Wedding’ has become a trope for a reason. Across consumer segments, the one thing that Indians spend most lavishly on in their lifetime is the wedding of their progeny. The spending on weddings most times goes up to three to four times the household's annual income. It is an event for which parents save money through the years.
An unlikely trigger for spending is also IPL, the annual cricket extravaganza. While IPL in itself may not be the root cause for spends, the timing of it which straddles summer (and therefore imminent purchase of household goods like ACs and refrigerators) and ‘Back-to-School’, along with the opportunity it provides for a mass reach out to a huge audience makes brands time new launches and communication in this period.