The fundamentals of the Indian economy remain strong, as RBI Governor Shaktikanta Das recently stated. India’s growth rate is among the fastest in the world, retail inflation has moderated, buffer food stocks are abundant, forex reserves are substantial, and the current account deficit is expected to remain “well within sustainable levels.”
Domestic consumption is making a strong comeback, traditionally one of the main drivers of India’s economic growth. This is great news for businesses of all sizes. Simply put, when consumers spend more, businesses have more capital to invest in, and increased liquidity throughout the system energises complementary sectors and higher-end goods and services.
But what is the significance of this surge in domestic consumption?
One, as the festive season approaches, these numbers are likely to rise even more. Between August and November, when sales of everything from two-wheelers to real estate are at their peak, Indian consumers tend to spend more. Given how quickly consumption has recovered, the figures for the next three quarters will likely be even better.
Two, for better or worse, demand continues to drive India’s growth story. In a typical fiscal year, private expenditure accounts for approximately 55 per cent of the total national GDP. Furthermore, it has a significant impact on the next major growth driver, Gross Fixed Capital Formation (GFCF), which accounts for the money invested by businesses. As a result, strong domestic consumption translates unintentionally into strong economic growth.
Three, rising household consumption will boost demand for goods and services across industries, especially those involving significant amounts of “discretionary” or luxury spending. Product segments influenced by “premiumisation” trends are included in the latter. These include everything from chocolates and alcoholic beverages to laptops and headphones, as well as clothing and cosmetics. In some categories, such as automobiles, demand for premium products has outpaced demand for entry-level variants. In FY22, for example, premium car sales increased 38 per cent year on year, while lower-priced car sales increased only 7 per cent.
Why is luxury spending increasing in India?
Rising consumer incomes and purchasing power are aiding it: average per capita income has already surpassed USD 2,000 and is expected to exceed USD 12,000 by 2047. Furthermore, the rapid growth of the e-commerce sector and digital transactions has increased customer access to the luxury market. Furthermore, as consumers have become more value- and customisation-oriented, previously dominated by HNWIs, premium segments are rapidly diversifying to include Millennials and non-metro consumers. The typical cohort of HNI and NRI customers has also expanded to include affluent middle-class consumers in some segments, most notably luxury housing, due to the proliferation of remote and hybrid working models.
Furthermore, the premium product space is still in its early stages and remains largely untapped. As a result, market participants have numerous opportunities. For example, while the Indian smartphone market fell by 1 per cent year on year in H1CY22, the premium segment increased by 83 per cent. This segment, however, accounts for only 6 per cent of the total smartphone market.
As domestic consumption continues to rise, premiumisation trends will be boosted across other sectors, from quick-service restaurants (QSRs) and home products to hospitality and healthcare. This has happened before. According to Jun Nie and Andrew Palmer’s paper “Consumer Spending in China: The Past and the Future,” the threefold increase in household spending in China between 2000 and 2015 was accompanied by a sevenfold increase in spending on transportation and communication services.
So, where can investors find investment opportunities?
Discretionary consumption and premiumisation will account for a disproportionate share of growth.
Hospitality and tourism players will benefit from increased air travel, increased demand for top-tier hotels and resorts.
The automotive industry’s clientele for premium car models will become more diverse, especially as the EV revolution gains traction.
The prospects for the entertainment sector are just as promising, with people willing to pay for subscription packages and remain loyal customers even in tier-2 and tier-3 cities as long as there is content worth the money.
Companies in real estate, home-related products, and the FMCG personal care space will also benefit greatly.
The key takeaway is that Indian consumer markets will continue to be a key focus area for global public and private equity investors. Existing and new companies will generate hundreds of billions of dollars in market capitalisation.
To summarise, domestic demand will likely continue to drive India’s economic growth story, which will be increasingly influenced by the discretionary spending of a growing cohort of “premium” consumers. This trend presents an important opportunity for investors to get a head start on a veritable 21st-century gold rush.
(The views expressed in this article are personal and that of the authors. The authors head AltG, a firm that Offers Proprietary Research That Clients Leverage to Identify and Execute High Growth Capital Allocation Opportunities. You can reach them at email@example.com)
Google Play introduces UPI Autopay payment in India
Google announced on Tuesday that it is introducing UPI Autopay as a payment option for subscription-based purchases on Google Play in India.
Introduced under UPI 2.0 by NPCI (National Payments Corporation of India), UPI Autopay helps customers make recurring payments using any UPI application that supports the feature.
“With the introduction of UPI Autopay on the platform, we aim to extend the convenience of UPI to subscription-based purchases, helping many more people access helpful and delightful services – while enabling local developers to grow their subscription-based businesses on Google Play,” Saurabh Agarwal, Head of Google Play Retail & Payments Activation – India, Vietnam, Australia and New Zealand said in a statement.
Moreover, UPI Autopay makes setting up subscriptions easy.
Users need to simply tap on the payment method in the cart, select “Pay with UPI,” and then approve the purchase in their supported UPI app after selecting a subscription plan to purchase.
Google Play helps consumers transact safely and seamlessly in more than 170 markets, according to the report.
Also, the platform supports over 300 local payment methods in over 60 countries, removing complexities associated with finding and integrating local payments.
UPI is one such payment option, introduced on the Play Store in India in 2019.
In India, UPI has transformed the mobile payment framework, and on Google Play as well, many people are enjoying and using apps that take advantage of UPI-based transactions, the statement added.
Invest Karnataka 2022 paved way for Rs 9.82 lakh cr investment: CM Bommai
Karnataka Chief Minister Basavaraj Bommai announced at the concluding ceremony of the 3-day Global Investors Meet (GIM) in Bengaluru that “investments totaling about Rs 9.82 lakh have been committed in diverse sectors in the state.” Bommai thanked the participants in the event and investors.
Addressing the gathering, the CM said, “This GIM is different from other such Investor Meets as this has been organised during challenging times and has succeeded in showing us the way forward. What Karnataka thinks today, India thinks tomorrow. We will work with the investors shoulder to shoulder to make all these investments fructify on the ground.”
Thanking all the investors and delegates who participated in the GIM 2022, Karnataka Large and Medium Industries Minister, Murugesh Nirani, said “Invest Karnataka has laid a strong foundation for the development of Karnataka in the next five years. I am happy that we have met the core objective of this GIM, which is to bring in investments in diverse sectors and create jobs, and take industries beyond Bengaluru.”
The valedictory session was also attended by Bhagwanth Khuba, Union Minister of State for New and Renewable Energy, Chemicals & Fertilizers.
Inaugurated by Prime Minister Narendra Modi virtually on Wednesday, the event culminated on Friday with the valedictory session in which Chief Minister Basavaraj Bommai re-assured investors from all across the world of sustained support by his government.
Among top industrialists, Chairman of Jindal Group, Sajjan Jindal; Vice Chairman of Toyota Kirloskar Motor Pvt Ltd, Vikram S. Kirloskar; Chairman, Wipro, Rishad Premji; Vice Chairman, Bharti Enterprises, Rajan Bharti Mittal; CEO, Adani Ports and SEZ, Karan Adani and MD, Sterlite Power, Pratik Agarwal shared their experience in Karnataka and expressed continued interest in the state.
The Global Investors Meet witnessed 30+ immersive sessions spread across three days. These sessions were a mix of innovative formats such as panel discussions, fireside chats, and TED-style talks.
In addition to the speaker sessions, a number of networking events, cultural performances, business exhibitions (with 300+ exhibitors), and country sessions ran parallelly across the 3 days. The country sessions were hosted by partner countries — France, Germany, Netherlands, South Korea, Japan and Australia.
Unfortunately, there is no choice: Musk on Twitter layoffs
Elon Musk on Saturday said that there is no choice other than brutally firing half of Twitter’s workforce as the company is losing over $4 million a day.
After axing nearly 3,800 employees across the globe, including in India, the new Twitter CEO said that he has given three months of severance to everyone who has been asked to go.
“Regarding Twitter’s reduction in force, unfortunately there is no choice when the company is losing over $4M/day,” Musk tweeted.
“Everyone exited was offered 3 months of severance, which is 50 per cent more than legally required,” he added.
Musk has laid off people across the departments at Twitter, eliminating several teams across the globe.
He also said that Twitter has seen a massive drop in revenue as activist groups are putting undue pressure on its advertisers.
“Again, to be crystal clear, Twitter’s strong commitment to content moderation remains absolutely unchanged. In fact, we have actually seen hateful speech at times this week decline below our prior norms, contrary to what you may read in the press,” he posted.
“Twitter will not censor accurate information about anything,” said Musk.
On charging $8 for the Blue subscription service, he said: “Trash me all day, but it’ll cost $8.”
The company lost $270 million in the April-June period after revenue slipped 1 per cent to $1.18 billion, reflecting advertising industry headwinds.
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