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India’s consumer boom: The road ahead


Several sweeping changes have transformed the face of the Indian consumer market over the past two decades. This has been primarily attributed to the explosive growth rates averaging close to 7.3 percent over the years, thereby creating a vibrant middle-class in the nation numbering close to 50 million people (1).…




Several sweeping changes have transformed the face of the Indian consumer market over the past two decades. This has been primarily attributed to the explosive growth rates averaging close to 7.3 percent over the years, thereby creating a vibrant middle-class in the nation numbering close to 50 million people (1). According to recent studies on the prospective size of the domestic consumer market, India may eventually become the fifth biggest consumer market in the world by 2025 (2). However, the government must take strong measures to improve the deplorable infrastructure standards and ensure a complete overhaul of the current educational facilities prevalent in the nation if it wants to realize the turbo-charged growth potential it foresees for itself.

Opportunities for growth
The economic reforms initiated in India in 1990-1991 have brought about a radical transformation in the spending propensities of India’s residents. It has been estimated that over the next twenty years, 123 million Indian households will possess discretionary income (3). This would lead to the creation of massive new consumer markets and thus create highly profitable business opportunities for a wide range of the domestic industries. Also, the anticipated rise in income patterns would help to lift millions of people out of poverty and enable them to join the swelling ranks of the Indian middle class. In fact, a recent McKinsey study on the rise of the consumer markets in India has estimated that the country’s middle class will rapidly expand to 583 million from the present level of 50 million over the next twenty years (4).  The study also highlights the critical fact that most of the predicted consumption increases will be dominated by the middle and richer strata of society, who are estimated to account for 59 percent and 20 percent of the total spending in the country (5). Moreover, over time, there has been a marked shift in the consumption patterns of the domestic residents who are gradually spending more on discretionary items like household appliances, designer cars, clothing and fancy restaurants as opposed to basic necessities like food and clothing (6). Other factors that have contributed immensely to the current consumer boom in India are the widespread access to the internet and cable television, a huge degree of interconnectedness among people via cheap cellular phones and the persuasive power of advertising which has now become a daily fixture in the lives of ordinary citizens (7).  All of these reasons have led to massive flows of capital and resources into India’s consumer markets by domestic and global retailers alike who do not want to lose out on one of the biggest growth opportunities of the coming decades.
     
Setbacks and challenges ahead
However, some caveats are in need of order here. Firstly, infrastructure standards remain abysmal in the nation and recent efforts by the government to make improvements in this area remain ineffectual at best. Secondly, financial systems in the nation still remain relatively unmodernized and are subject to excessive political interference. Financial sector reforms would have a significant impact and would help to accelerate the annual growth rates of GDP in the nation (8). Finally, bureaucratic controls and the persistent red tape prevalent at all levels of authority are other challenges confronting the players in the field. Only a strong concerted effort on the part of the central and state governments to deal quickly and effectively with these age-old issues would remove the impediments to domestic growth and enable India to reshape the face of global consumer markets in the near future.

Source: www.asiaecon.org |

 

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