Consumption Stocks

• India is the world’s 2nd most populous country with a population of 1.3 billion. It is poised to become the 3rd largest consumer market next to US and China with the expected consumer spending to grow to USD 6 trillion by 2030.

• The increased disposable income has led to change in consumption behaviour and attitude towards consumer debt. The household liabilities to leverage ratio increased significantly from 2013 to 2019 by as much as ~2x, with disposable income jumping by 2.3 times.

• The increased penetration of internet in the country with 50% of its population below the age of 25 and more than 65% below the age of 35 has increased the awareness and choices available to the consumers.

• An important consequence of rising incomes is growing appetite for premium products, primarily in the urban segment. 

• As the proportion of ‘working age population’ in total population increases, per capita income and GDP are expected to surge.

What industries/ sectors benefit from consumption theme?

• FMCG is the 4th largest sector in the Indian economy and is expected to have a long term growth rate of 8-10%. FMCG’s urban segment grew by 8% whereas, its rural segment grew 5% (as of September 2019), supported by moderate inflation, increase in private consumption and rural income. 

• Indian appliance and consumer electronics (ACE) market reached Rs. 76,400 crore (US$ 10.93 billion) in 2019. The same is expected to double to reach Rs. 1.48 lakh crore (US$ 21.18 billion) by 2025. Tremendous scope for growth lies in the rural market with consumption expected to grow in these underpenetrated areas and rising electrification. Demand for durables like refrigerators and consumer electronic goods are likely to witness an increased demand in the coming years, as the Government plans to invest significantly in rural electrification.

• The two-wheeler market in India is forecasted to expand at a CAGR of 7.33%, and reach a sales volume of ~25 million units by 2024, from 21 million in 2019. Although the Indian automobile sector is experiencing a slowdown due to down cycle, Indian government's norms of BS-VI transition and the electrification of two-wheelers by 2025, making the market volatile. However, an increased demand in urban and semi-urban areas, and a relatively low cost of ownership are some of the leading factors that can lead to their growth.

• Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13% to the country's GDP by 2025.

• Indian households had debts worth nearly Rs 43.5 trillion as of March 2020, up from Rs 6.6 trillion at the end of March 2008 and Rs 19.3 trillion five years ago at the end of FY15. Within the retail sector it was the consumer durables and credit card receivables which registered impressive growth.