X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
The consumerisation of urban India - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 7, 2007

    The consumerisation of urban India

    India is one of the world's youngest nations with nearly two-third of its population under the age of 35 years. Urban India accounts for nearly 30% of this burgeoning young population. There is a significant shift taking place in the consumption pattern of the young urban Indian consumer, aged between 21 and 40 years, led by various demographic, psychological and economic factors.

    Demographic trends and the strong growth in the Indian economy in the last few years are charting a new growth path for many consumer goods and services companies. The growth in the number of young working people in urban India who have grown up post liberalisation, rise in their aspiration levels and increase in their spending power will be the key drivers of growth for these businesses.

    Favourable demographics
    India's urban dwellers form 28% of the total population but account for about 42% of the total private consumption expenditure. Larger number of urban centres and the migration of the young rural population to urban centres for higher education and employment have driven urban growth rates. The growing share of young people in the population as well as development of urban India is leading to a rising number of working population in the cities who have higher spending power, led by high income growth and credit availability.

    The urban population between the ages of 15 to 34 years is expected to increase from 107 m in 2001 to 138 m in 2011, an increase of 30%. Also the proportion of young urban dwellers is growing. The migration to urban areas for better career opportunities will lead to an increase in the 15-59 age groups in urban areas. This group will boost consumption - as they have higher earning capacity and will also be able to spend more on themselves.

    Aspiration levels
    Strong economic growth, increasing globalisation, easy availability of credit and the rise of BPO and retailing has resulted in higher household incomes, and these continue to rise with the Indian economy. Also, the easy availability of credit has raised these aspirations. In India there has been significant increase in the percentage of households in the high-income and middleclass groups in recent times. This higher income is driving aspirations, especially amongst the middle class, leading to an increase in the desire to change lifestyles by increasing consumption. Western lifestyle exposure through more foreign travel and higher penetration of television, internet and other media, has increased the desire of this class to update its lifestyle. Also, wide availability of financial products and lower interest rates has accelerated the penetration of credit. Ease of payment due to higher penetration of plastic money is also driving consumer-spend on impulse purchases.

    Households in India (m)
    The Classes 1994-95 1999-00 2005-06
    Rich (above US$ 4600) 1 3 6
    Consuming (US$ 970-4600) 29 66 75
    Climbers (US$470-970) 48 66 78
    Aspirants (US$340-470) 48 32 33
    Destitutes (less than US$ 340) 32 24 17

    In the last three to four years, there has been a marked shift in the consumption pattern. The consumers are not satisfied by purely spending on basic products and services; they want to indulge by consuming goods and services that satisfy their lifestyle needs, which can broadly be classified as leisure, convenience & comfort, wellness and aspirational needs. The malls are rapidly replacing the kirana stores and the cinema houses are now turning into multiplexes. The number of mobile users has increased by 86.6% CAGR since 1997 to 2006. Going forward, the demand for lifestyle goods is likely to witness robust growth.

    The favourable demographics, rising income and change in lifestyle will lead to an explosive growth in the lifestyle categories like retail, ready to eat foods, gems, autos, travelling, hospitality etc. over the next few years. Not only the basic but the lifestyle goods and services are likely to be the next growth drivers.

     

     

    Equitymaster requests your view! Post a comment on "The consumerisation of urban India". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working (Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    The Key Factor Pushing Gold Up These Days (Outside View)

    Aug 21, 2017

    PersonalFN explains the chief factor pushing gold prices up of late.

    How Unique Are the Companies You Invest In? (The 5 Minute Wrapup)

    Aug 21, 2017

    One of the hallmarks of successful investing is to look out for companies that have a unique and enduring moat.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 21, 2017 (Close)

    MARKET STATS