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India’s Consumer Market
Jyoti NarasimhanCountry Intelligence GroupGlobal Insight
Copyright © 2007 Global Insight, Inc.
Trend GDP Growth Has Risen Substantially
-6
-3
0
3
6
9
12
1970 1976 1982 1988 1994 2000 2006
Real GDP Growth Linear (Real GDP Growth)
Trend growth has drifted upward. Each business cycle has operated around a higher underlying trend-growth path.
Trend growth has drifted upward. Each business cycle has operated around a higher underlying trend-growth path.
(Percent change)
Copyright © 2007 Global Insight, Inc.
Consumption Growth Remains a Key Driver
0
2
4
6
8
1992 1994 1996 1998 2000 2002 2004 2006
Real per capita GDP growth Real per capita private consumption growth
(Percent change)
Copyright © 2007 Global Insight, Inc.
The Consumption Basket Is Evolving
1999 2005
Source: Marketing Whitebook
48
14
6
41
84
8
11
4 7
48%
4%6%
14%
5%
8%
4%3% 5%
Grocery Consumer durables Personal care items Saving and investmentBooks and music Dining out Movies and theater VacationHome textiles Accessories Footwear EntertainmentClothing
41%
7%8%4%
8%
11%
5%
4%
7%
Copyright © 2007 Global Insight, Inc.
The Middle Class Is Expanding
145 million5 millionTelephone Connections
7.6 million1.8 millionTwo-wheelers Sold
1,319,000205,000Cars and Commercial Vehicles Sold
US$1,112 billionUS$50 billionBombay Stock Exchange Market Capitalization
100 million15 millionPeople in Households with Rs.200,000–1,000,000 Income
20061991
Source: Handbook of Statistics on the Indian Economy
Copyright © 2007 Global Insight, Inc.
0
20
40
60
80
100
1991 1993 1995 1997 1999 2001 2003 20050
25
50
75
100
125
Domestic Credit (Left scale)Total Scheduled Commercial Bank (SCB) Assets (Right scale)
Rapid Financial Deepening Continues
Starting from a low base, the financial sector has grown rapidly.Starting from a low base, the financial sector has grown rapidly.
Source: Reserve Bank of India
(Percent of GDP)
Copyright © 2007 Global Insight, Inc.
Urbanization Will Boost Incomes
0
5
10
15
20
25
30
35
1980 1985 1990 1995 2000 2005 2010 2015
(Urban population as a percent of total)
Sustained reform, job creation, and improved educational opportunities are necessary to take advantage of the demographic dividend.
Sustained reform, job creation, and improved educational opportunities are necessary to take advantage of the demographic dividend.
Source: United Nations
Copyright © 2007 Global Insight, Inc.
Consumer Price Inflation Will Be Kept in Check
0
2
4
6
8
10
12
14
2000 2002 2004 2006 2008 2010 2012 2014
Real Private Consumption Growth CPI Inflation
(Percent change)
Copyright © 2007 Global Insight, Inc.
Government’s Role in Enabling the Retail Revolution
• Infrastructure– Provide adequate infrastructure necessary to keep pace
with the retail transformation– Streamline and improve logistic services– Improve productivity and cut costs
• Regulations– Encourage foreign investment in retail sectors– Implement fiscal incentives for domestic retailers– Enact further legislative reforms
• Property laws• Labor laws• Taxation
Copyright © 2007 Global Insight, Inc.
Road Development Is Slowly Increasing
0
1
2
3
4
5
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
(Total network roads, millions of kilometers)
Source: World Development Indicators
Copyright © 2007 Global Insight, Inc.
Infrastructure Is Improving, Though Gradually
• India’s most ambitious infrastructure project
• Highway development program (1999–2008) costs $12.5 billion over 9 years
• Will jump-start India’s competitiveness
• Potential for productivity gains
• Significant improvement in logistics and trade
Golden Quadrilateral (3,698 miles)North-South, East-West Corridors (4,536 miles)
Copyright © 2007 Global Insight, Inc.
FDI Inflows Are Concentrated in Manufacturing
15%9%
4%
4%
4%
18%
Electricals Equipment Misc. Industries Telecommunications Transportation Industry Chemicals excl Fertilizers Fuels, Power & Oil Refinery Drugs & Pharmaceuticals Cement & Gypsum Product Hotel & Tourism Metallurgical Industries Consulting Services TextilesOther
Source: Ministry of Commerce
(India FDI inflows by sector, share of total 2006 FDI inflows)
Copyright © 2007 Global Insight, Inc.
FDI Into India Will Rise as Regulations Ease
0
10
20
30
40
50
1996 1998 2000 2002 2004 2006 2008 2010 2012
(India FDI inflows, billions of U.S. dollars)
Prospects for investment are robust as investor interest has soared – AT Kearney FDI Confidence Index
Prospects for investment are robust as investor interest has soared – AT Kearney FDI Confidence Index
Thank You!
Jyoti NarasimhanCountry Intelligence GroupGlobal Insight
