A report prepared by Morgan Stanley estimates Indian food and beverages to go up by about another seven to eight percent. Home & personal care products sales will increase by up to four percent, driven by an increase in disposable income in the next five-six years. Adding appeal to India’s consumption story is fast-rising rural wage levels that have continued to go up, more than 18 percent on YoY basis as of 2012.
Against this encouraging backdrop, an insightful news report by Reghu Balakrishnan and Dev Chatterjee of the Business Standard, mention how the multinationals are eager to tap the vast potential of the Indian consumer driven growth story not only in cities but also in thriving rural economies though the latter being largely dependent on the vagaries of monsoon. The writers make following important observations in this regard:
As economies across the world slow down, the Indian consumers are providing foreign investors comfort to open their purses and put their money in companies here. It’s not only food products, the prospects of increased air travel by urban Indians and use of wireless phones have, respectively, made Etihad buy a 24 per cent in stake in Jet Airways for $380 million and led Qatar Foundation to invest $1.2 billion in Bharti Airtel.
The news report quotes Pramod Kumar, Barclays Capital Managing Director, as saying: “It’s heartening to see in-bound investments of significant size, such as that by Diageo, Unilever’s stake enhancement, Qatar’s investments in Airtel, etc, particularly at a time when the mood among Indians is cautious and somewhat negative. These clearly show long-term strategic investors view India as an attractive market in the long run, with strong fundamentals.”
Bankers say these investments have happened at a time when equity market valuations have been reasonably strong. So, clearly, these are not driven by an opportunistic view of the market, with a short-term perspective. It’s not only large investors, even small ones are betting on consumer companies.
“The HUL open offer endorses that the Indian consumer market space is vibrant and growing, and one of the few sectors where growth rates are far higher than the growth rate of the economy,” states Shriram Subramanian, the InGovern Founder. “Given these, local investors have to decide whether they want to invest in comparable companies at modest valuations or ride the India growth and consumption story with the market leader.”
Clearly, traveling, talking on phone and impulse shopping are three things that will further thrive in India. These are developments that the corporate gifting industry players must also make note of, while they devise their growth strategy so as to target specific sectors with their products.
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