General Awareness

April 04, 2017 @ 01:15 PM

The future of Indian consumer market

MBA Aspirants are expected to know markets beyond established Brands. This helps them to understand industry for which they are dreaming to join in future.  
 
Today, you will read on  The future of Indian consumer market
 
The only thing that remains constant in the world is change. Since independence Indian consumer market has been changing under the impact of various forces. These forces on the Indian consumer market have brought in a lot of divides. The prominent ones are the divide between the rich and the poor, rural populace and the urban populace as well as the divide between the English speaking and non-English speaking population.
 
India after a tumultuous period of more than forty years opened its economy in 1991. Government of India ushered in the LPG reforms that is liberalization, privatization and globalization in 1991 resulting in high economic growth. The era of Hindu rate of growth was over. 
 
This new growth coupled with improvement in information technology gave rise to a new consuming middle class.  These consumers believed in spending on discretionary shopping goods, were influenced by the work culture of MNC's in sectors like IT, ITES, banking, telecom among others. Even local businessmen were benefitted by the impact of high economic growth and therefore they also joined the spending spree.
 
This continued in the new millennium. As FDI inflows increased, more international brands were available. Even because of low interest rates in USA, liquidity flows increased resulting in lower interest rates in India. 
 
Home loans and other types of credit off take jumped resulting in multiplier effect on consumption. The party continued until 2008, when the world was hit by the financial crisis resulting in a slowdown in India. Since then, there has been a tapering of consumption pattern. Sentiments and the fundamentals are not to be very happy about.
 
In fighting with the slowdown the government has increased its expenditure and thereby increasing the fiscal deficit.  The current level of fiscal deficit which is hovering around 5 percent of GDP is unsustainable.  
 
It is partly responsible for high inflation. Other factors responsible for high inflation are policy paralysis in areas of agriculture, banking among others. High inflation has resulted in lower disposable incomes. Discretionary spending has come down resulting in slow consumption growth.
 
The hoopla and excitement of 2003-07 will come back or not depends upon a lot of factors. Yes in the long run, the consumption story looks bright. According to McKinsey reports, over 291 million people will move from desperate poverty to a more sustainable life, and India's middle class will swell by more than ten times from its current size of 50 million to 583 million people.
 
By 2025 over 23 million Indians—more than the population of Australia today—will number among the country's wealthiest citizens. The medium term and short term prospects of Indian consumer market rests on the growth in personal incomes of the people and low inflation. Both can only be achieved with proactive intervention of the central government as well as the various state governments.
 
Till the general elections of 2014, the sentiments will not be euphoric as far as the consumption story is concerned. Beyond that, the new government has to improve the governance by leaps and bounds to revive the economic growth and thereby increasing the personal incomes. 
 
The government has to bring a lot of reforms like amendment in APMC act so that the aggregate food supply and its efficient distribution can improve resulting in lower food inflation and higher discretionary spending. 
 
So in the short to medium term, the consumption story of Indian market rests on the new government and its policies. Things like hoarding, black-marketing has to come down.
 
So, it will be interesting to see who comes to power in 2014 because even the prospects of Indian consumer market and our affluent lifestyle expectations rest on the quality of the new government.
 
  
 
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