India is set to have more than a billion internet users by 2030 driving huge demand for household durables and services according to report from the World Economic Forum.
The Future of Consumption in Fast-Growth Consumer Markets – India has been written in association with Bain Consulting.
The report says: “Online connectivity, and the resultant access to information, is proving to be a key driver of differences in aspiration and the desire to spend and upgrade consumption, even among people at similar income levels.
“Those who are more connected have a keener sense of what is “desirable” and are willing to invest in more comfortable living – including a greater spend on household durables and services. As a vast majority of India is connected over the next decade, this pattern will become a driver of overall consumption growth.”
Bypassing cars and credit cards
The report also notes that India will bypass certain technological stages – the best known is the jump straight to mobile phones without landlines – yet it applies to other important sectors as well.
The report adds: “The Indian business landscape now abounds with numerous indications of a similarly varied path to growth. Digital entertainment and subscription video have eliminated the need for owning personal media. E-commerce is taking a share from traditional retail at a speed that “modern” organized retail has struggled to emulate. Youngsters in crowded cities are embracing alternative forms of transport before car ownership. Mobile-based payment models have acquired greater acceptance in a shorter time than credit cards did over the past two decades.”
The report also says that compared to low personal saving rates in many developed countries in the west and east (6%-7% in the US, 9%-10% in Germany, 4% historically in UK, 2.5% in Japan), India’s households have maintained a high savings share of their income at 22% though that may be due to a lack of access to consumable goods and services or lack of social security nets.
India has a median age of 28 years and will continue to remain young up to 2030 with a median age of 31 years, compared to 40 years in the US and 42 years in China.
The report says that despite certain structural differences such as higher consumption expenditure and lower savings, the pattern of consumption mirrors China more closely than any other market.
It adds: “Both countries are very similar in their high share of mobile-powered internet connectivity, as opposed to other modes of access. Chinese business model innovations, ranging from mobile-based fin-tech, artificial intelligence powered e-commerce to ecosystems at the centre of a wide variety of services, provide very relevant templates for Indian businesses to learn from.”
It suggests there is a huge opportunity for business but identifies three big challenges for both the private sector and central, regional and local governments.
- Skill development and future-focused employment generation will be critical to direct the potential of India’s young workforce. As nearly 10-12 million working age persons get added to India annually over the next decade, it will be critical to provide them with gainful and more formal employment and reduce the skills-gap that exists today.
- Social and economic inclusiveness of rural India is also a key imperative, especially as connectedness creates aspirations. Currently, multiple “access” barriers, such as poor physical and digital connectivity and lack of financial inclusion, constrain the spend and well-being of rural dwellers. Innovative efforts by businesses and governments, like the impetus to cashless, digital transactions, can accelerate the inclusion of rural India.
- A broad set of stakeholders will need to evaluate and respond to the challenges of creating a sustainable and healthy future through better access to healthcare, reduction in pollution and better urban planning to reduce congestion.