India in 2018: a youthful land of opportunity?

Consumer optimism is high and the economy appears to be in recovery, but challenges remain around India’s digitalisation, particularly in rural areas.

Some may perceive that India has hidden in China’s shadow as China’s industry, export and technology advances continue to reach new heights. However, India is coming back into the spotlight. With its youthful demographics, ongoing economic reforms and path to digitalisation, India is forecast to be one of the world’s fastest-growing large economies over the next 10 years.

The Indian economy seems to be in recovery mode, performing well in the second half of 2017 with GDP improving at 7.2% growth in Q4 2017, suggesting that the impact of recent legislative reforms such as demonetization and the implementation of the Goods and Services Tax is subsiding.

Consumption and healthier public capital expenditure levels continue to be the key pillars of growth. As a result of the GST implementation where overall taxes were lowered in a number of areas, there has been an expansion in private consumption and improved consumer sentiment in spending which has been bolstered by a significant number of consumer promotions from manufacturers. Inflation has increased through 2017 edging back to 2016 levels, as global crude oil prices elevated in the quarter. However, a drop in wholesale prices has helped keep inflation rates buoyant.

Consumer optimism around the economy continues to be strong with consumer confidence at an index of 130 – keeping India as one of the most optimistic countries in the world. The government’s recent budget for 2018 aims at boosting rural development by providing higher minimum prices for farm produce. This is expected to help deepen the pockets of India’s vast number of rural consumers who represent 66% of India’s population. As a result, it is anticipated that FMCG manufacturers can expect higher consumption growth from rural markets in 2018.

While India is on its path to digitalisation, it still has a long way to go. India’s demonetization policies in late 2016 encouraged consumers to adopt and embrace digital payment methods and ease them into cashless transactions. However today, still less than 40% of Indian businesses have an online presence, according to the World Bank’s Digital Dividends report.

The relatively high cost of broadband internet access may be part of the problem, as well as expanding digital initiatives beyond urban areas. Another challenge in pushing a digital economy in rural areas are the low levels of financial inclusion. Opening of ‘Jan Dhan’ accounts have added customers to the financial mainstream; but a large number are still non-operational. As a result, rural represents one of India’s greatest opportunities but also challenges when it comes to rolling out local infrastructure.

India continues to represent a land of opportunity to retailers and manufacturers alike, both now but particularly into the future. By 2025, the United Nations estimates, India will have a greater and much younger population than China by the year 2025 and it is this younger demographic that will be the key consuming class of the future purchasing cars, homes and other consumable good driving domestic consumption. But to win, brands must ensure they have the right touchpoints and distribution channels to reach India’s masses and above all ensure that products and services add value to people’s lives.


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Indian economy to witness faster than expected growth in 2018Investing in India