Consumersentimentstowards

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DEBANJAN PAUL

SNEHASHISH LAHA1

GREAT LAKES INSTITUTE OF MANAGEMENT

PGPM 2014-2015

India Consumer Sentiment is an up-to-date barometer of currentconditions and future expectations for the Indian economy. It is aleading measure of consumer strength for India and can be used tohighlight consumer spending habits and assess the outlook forgovernment policy moves.The India Consumer Sentiment provides clues as to retail strengthand consumer spending. Designed to track the degree of confidenceand optimism consumers express on the economy, the CONSUMERSENTIMENT India Consumer Sentiment delivers detailed information oncritical areas that affect spending such as housing, durable goods,cars, savings and investments, stock market, and inflation.The indicators allow investors, economists, and companies toidentify economic trends and to make informed investment andbusiness decisions. The indicators‘ ability to track and forecastconsumer spending allows for a detailed and valuable picture of theoverall Indian economy.

Indicators explore attitudes, perspectives and confidence in emerging markets like India and other emerging nations.

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Consumer confidence index in IndiaThe BluFin India Consumer Confidence Index is the first monthly,statistically robust index of consumer sentiment in India. The CCIis designed to provide reliable insights into the direction of theIndian national and regional economies. Released once a month, theindex is computed from the results of a monthly survey of 4,000consumers in 18 cities across India. The BluFin Consumer ConfidenceIndex was developed by a team of financial economists andstatisticians led by Dr. Sam Thomas, Ph.D., Director of Research andDevelopment at BluFin. The BluFin consumer confidence index (CCI) was 39.9 in March, 2012compared with its lowest score of 35.8 in December last year. Theindex below 50 reflects pessimism and above 50 optimism.

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The indicators allow investors, economists, analysts and companies to identify economic trends and make informed investment and business decisions.

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The India Consumer Sentiment provides reliable and up-to-date intelligence on the state of the Indian economy. It provides a monthly snapshot of market activities as perceived by local consumers.

The India Consumer Sentiment is an up-to-date barometer of current conditions and future expectations for the Indian economy. It is a leading measure of consumer strength for India and can be used to highlight consumer spending habits and assessthe outlook for government policy moves.

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The India Consumer Sentiment provides clues as to retail strength and consumer spending. Designed to track the degree of confidence and optimism consumers express on the economy, consumer Sentiment delivers detailed information on critical areas that affect spending such as housing, durable goods, cars,savings and investments, stock market, and inflation.

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Methodology India Consumer Sentiment delivers an in-depth overview of theeconomic landscape as seen by Indian consumers. Our methodology isdesigned to provide relevant and timely economic insight that can beeasily and quickly analysed. At least 1,000 telephone interviews are conducted each month fromfirst, second and third tier cities in India. Data is segmented intoage, income and geographical groups.

India Consumer ReportThe India Consumer Sentiment serves as the basis for its owndedicated report, the CONSUMER SENTIMENT India Consumer Report. Thismonthly report delivers in-depth analysis of consumers‘attitudes,perspectives and confidence across the country. Written by our in-house team of economists, the CONSUMER SENTIMENTIndia Consumer Report blends the analysis of consumer confidencewith relevant commentaries. It allows users to develop a thoroughunderstanding of the Indian market and get direct access toconsumers‘viewson the economy and its future. The indicators offerunique macro-economic data and insight to businesses and theinvestment community. We produce data and intelligence that isunbiased, pertinent and responsive.Specialising in business andconsumer focused macro-economic reports, we give our customers theability to make timely and relevant decisions. We strive to provide

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up-to-date information on business and consumer confidence on theeconomy.

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INDIAN CONSUMER INDICATOR-COMPONENTS

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Personal Finance: Current

Personal Finances: Expected

Business Conditions in 5 Years

Business Conditions in 1 Year

Durable Buying

Conditions

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As seen from the above graphs, competition among the carmanufacturers is increasing so they are reducing their prices.

SECTORAL ANALYSIS:

AUTOMOBILES SECTOR

The overall sales of automobiles including exports stood at6,735,988 units in April-July period of FY 2013-13 as against6,892,768 units during same period of FY 2012-13, recording 2.27%decrease. Domestic Sales for the April-July period of financial year2013-14 stood at 57,90,184 units as against 59,13,993 units duringsame period for financial year 2012-13, registering 2.21% decline.Total Exports marks 3.37% decline for April-July 2013-14 at 945,804units against 978,775 units in April-July 2012-13.The overall salesof automobiles including exports stood at 6,735,988 units in April-July period of FY 2013-14 as against 6,892,768 units during sameperiod of FY 2012-13, recording 2.27% decrease. Domestic Sales forthe April-July period of financial year 2013-14 stood at 57,90,184units as against 59,13,993 units during same period for financialyear 2012-13, registering 2.21% decline. Total Exports marks 3.37%decline for April-July 2013-14 at 945,804 units against 978,775units in April-July 2012-13.The sales of Ashok Leyland for the monthof September 2014 recorded 27% growth as 9,193 units were soldagainst 7,232 sold units sold in September 2013. The M&HCV salesincreased by 40% in September 2014 at 6,621 units against 4,715units sold during September 2013. TVS Motor Company recorded 27%growth in sales during the month of September 2014, with total salesof 250,853 units in the month of September 2014 against 197,409units recorded in the month of September 2013. Tata Motors’ total

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sales (including exports) of Tata commercial and passenger vehiclesin September 2014 were 46,118 vehicles, a decline of 8% over 50,387vehicles sold in September 2013.

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AVIATION SECTOR:

Reasons to Invest: India is one the fastest growing aviation marketsand currently the ninth largest civil aviation market in theworld.India is projected to be the 3rd largest aviation market by2020.The Indian aviation sector is likely to see investmentstotalling USD 12.1 Billion during 2012-17; USD 9.3 Billion isexpected to come from the private sector.Statistics:Domestic Passenger traffic CAGR – 7.71% (FY 2006-13); 209 Million byFY 2017.International Passenger traffic CAGR – 8.96% (FY 2006-13); 60Million by FY 2017.Total freight traffic CAGR – 5.2% (FY 2006-13); 2.19 Million Tonnesin FY 2013.More than 85 international airlines operate in India and 5 Indiancarriers connect over 40 countries.

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Growth Drivers: Greenfield airport at Navi Mumbai, Mopa (Goa) andsome brownfield airports of Airports Authority of India (AAI) and 50airports under the low cost model are to be developed all over thecountry, including under PPP.

Indian aviation is experiencing dramatic growth across the board,from the emergence of LCC/new carriers to a growing middle classready to travel by air as well as growth in business and leisuretravel.India’s middle income population is expected to increase from 160Million in 2011 to 267 Million by 2016.

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Greater focus on infrastructure development; increasingliberalisation – Open Sky Policy; AAI driving modernisation ofairports, Air and Navigation Systems.Growth in aviation accentuating demand for MRO (maintenance, repairand overhaul) facilities.Large scale collaborations/M&A deals – Etihad Airways & Jet Airways;Tata Group & Singapore Airlines, Tata Group &AirAsia.India plans toincrease the number of operational airports to 250 by the year 2030.

Bio-Technology:

The Key Indian players in this segment are Serum Institute Of IndiaLtd.(revenue of 294 million), Biocon Ltd.(278 million), PanaceaBioTech, Glaxo SmithKline and many others.

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CONSTRUCTION SECTOR:

An investment of USD 1,000 Billion has been projected for theinfrastructure sector until 2017, 40% of which is to be fundedby the private sector. 45% of infrastructure investment willbe funnelled into construction activity and 20% set tomodernise the construction industry.

The Indian government has undertaken a number of measures toease access to funding for the sector.

Construction activities contribute more than 10% of India’sGDP.

The construction industry in India has seen sustained demandfrom the industrial and real estate sector.

An estimated USD 650 Billion will be required for urbaninfrastructure over the next 20 years.

Housing for seniors has seen increased interest levels fromcorporates, the hospitality and healthcare industries over thelast few years.

IT AND BPM: The IT-BPM sector constitutes 8.1% of the country’s GDP and

contributes significantly to public welfare. India’s IT industry amounts to 7% of the global market,

largely due to exports. 60% of firms use India for testing services. Rapidly growing urban infrastructure has fostered several IT

centres in the country. The Indian IT industry has saved clients USD 200 Billion in

the past five years.

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OIL AND GAS:Policies such as the New Exploration Licensing Policy and theCoal Bed Methane Policy have been put in place to encourageinvestments across the industry value chain. Thirty-four blockswere put up for bidding in the ninth round of the N.E.L.P.Demand for primary energy in India is to increase threefold by2035 to 1,516 Million Tonnes of Oil Equivalent from 563 MillionTonnes of Oil Equivalent in 2012.Several industries are increasing consumption of natural gas inoperations.Several domestic companies such as the Oil and Natural GasCorporation, Reliance Industries Limited and Gujarat StatePetroleum have reportedly found natural gas in deep waters.As part of pricing reforms for the natural gas sector in 2013,the government approved a new pricing scheme to further aligndomestic prices with international market prices and to raiseinvestment for the sector.Despite being a net importer of crude oil, India has become anet exporter of petroleum products by investing in refineriesdesigned for export, particularly in Gujarat.Several private companies have emerged as important players inthe past decade. Cairn India, a subsidiary of British companyCairn Energy, controls more than 20% of India’s crude oilproduction through its operation of major stakes in theRajasthan and Gujarat regions and the Krishna-Godavari basin.Private companies such as Reliance Industries Limited and EssarOil have become major refiners.The government is preparing to issue the 10th round of biddingfor the National Exploration Licensing Policy.

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It is a transparent and level playing field for privateinvestors and national oil companies – both enjoy the samefiscal and contract terms.60% of the prognosticated reserves of 28,000 MMT are yet to beharnessed.

MEDIA AND ENTERTAINMENT:

Total market size of the Indian entertainment industry stoodat INR 918 Billion in 2013, growing by 11.8% over 2012.

The industry is expected to register a CAGR of 14.2%, reachingINR 1785.8 Billion in 2018.

The size of the television industry in India was estimated atINR 417 Billion in 2013, with a projected CAGR of 16% between2013-18, amounting to an INR 1785.8 Billion industry in 2018.

India is the world’s third largest TV market, after China andthe USA, with 161 Million TV households.

India has a large broadcasting and distribution sector,comprising approximately 796 satellite TV channels, 6000multi-system operators, around 60,000 local cable operators, 7DTH operatorsand 4 IPTV service providers.

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PHARMACEUTICALS SECTOR:

India is expected to rank amongst the top three pharmaceuticalmarkets in terms of incremental growth by 2020.

India is the sixth largest market globally in terms of size. India’s generic drugs account for 20% of global exports in

terms of volume, making the country the largest provider ofgeneric medicines globally.

India’s cost of production is significantly lower than that ofthe USA and almost half of that of Europe.

A skilled workforce as well as high managerial and technicalcompetence.

Economic prosperity is likely to improve affordability forgeneric drugs in the market.

Approval time for new facilities has been drastically reduced.

TEXTILES AND GARMENTS SECTOR: India has the second largest manufacturing capacity globally.

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The Indian textile industry accounts for about 24% of the world’s spindle capacity and 8% of global rotor capacity.

India has the highest loom capacity (including hand looms) with 63% of the world’s market share.

India accounts for about 14% of the world’s production of textile fibre and yarn and is the largest producer of jute andthe second largest producer of silk and cotton.

A strong production base of a wide range of fibre/yarn from natural fibres like cotton/jute, silk and wool to synthetic/man-made fibres like polyester, viscose, nylon and acrylic.

Increased penetration of organised retail, favourable demographics and rising income levels to drive textile demand.

India enjoys a comparative advantage in terms of skilled manpower and cost of production over major textile producers.

Abundant raw material and increasing demand for exports to boostfibre production.Abundant availability of raw materials such as cotton, wool, silkand jute.

TOURISM INDUSTRY:Tourism in India accounts for 6.8% of the GDP and is the thirdlargest foreign exchange earner for the country.India ranks 42nd in the United Nations World Tourism Organizationrankings for foreign tourist arrivals.India registered 6.97 Million foreign tourist arrivals in 2013,registering an annual growth of 5.9% over the previous year.The foreign exchange earnings from tourism during 2013 wasUSD 18.13Billion, registering an annual growth of 2.2% over the previousyear.

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India is the 16th most visited country in the world, with a share of1.56% in the world’s tourism receipts.India offers geographical diversity, attractive beaches, 30 WorldHeritage Sites and 25 bio-geographic zones.India has a diverse portfolio of niche tourism products – cruises,adventure, medical, wellness, sports, MICE, eco-tourism, film, ruraland religious tourism.

India's tourism industry is experienced a strong period of growthwhich is drived by the burgeoning Indian middle class and highspending foreign tourists with coordinated government campaigns topromote 'Incredible India'.This particular industry in India is substantial and vibrant, is atverge of becoming a major global destination. Travel and tourismindustry in India is one of them most profitable industries in thecountry and credited with contributing a substantial amount offoreign exchange. As during 2006, four million tourists visitedIndia and have spent US $8.9 billion. In India the disposable incomehas gone up by 10.11% annually from 2001-2006, where much of that isbeing spent on travel. Indian tourism Industry has also helped thegrowth in other sectors like horticulture, handicrafts, agriculture,construction and even poultry.Indian Tourism Industry is ranked 11th in the Asia Pacific regionand 62nd overall, moving up three places on the list of the world'sattractive destinations. As per the Travel and TourismCompetitiveness Report 2009 by the World Economic Forum, it had beenranked the 14th for best tourist destination & for its naturalresources, 24th for its cultural resources, as it has most of theWorld Heritage sites, both natural and cultural, rich fauna andflora & strong creative industries in the country.In air transport network India has bagged 37th rank for itself.Indian tourism industry is ranked 5th in the long-term (10-year)growth and is expected to be the second largest employer in theworld by 2019.Since 1990 the Indian tourism industry has not been good. Though theIndia economy had slowed, it was still growing faster than the restof the world. During 2009, the country has seen a seen rise of 6.5%,compared to the world output, which is seen falling 0.4%. WithIndian economy growing at around 7% per annum and rise in disposableincomes of Indians, an increasing number of people are going onholiday trips within the country and abroad resulting in the tourismindustry growing wings.

THERMAL SECTOR:

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The government is targeting a capacity addition of 88.5 GW during2012-17 and 86.4 GW during 2017-22.The National Tariff Policy (2006) ensured adequate return oninvestment to companies engaged in power generation, transmissionand distribution and to companies producing assured electricity toend users at affordable and competitive rates.Launch of the Ultra Mega Power Project (UMPP) scheme through tariff-based competitive bidding.As of March 31, 2013, total coal reserves stood at 298.94 BillionTonnes, out of which 123.19 Billion Tonnes were proven reserves.Proven natural gas reserves measure up to 1,354.76 Billion cubicmeters.

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