Rural India to boost retail and FMCG growth

10 April 2009

NEW DELHI: The automotive, FMCG and retail sectors in India are all due to benefit from increased levels of consumer demand in rural areas, helping to mitigate the overall impact of the economic downturn, according to research by the Associated Chambers of Commerce and Industry of India.

While there are over 1 billion consumers in India, it has been argued that brands operating in the country have to take a nuanced approach in order to establish themselves with a highly varied population.

Figures from ASSOCHAM value the Indian FMCG market at 200,000 crore rupees ($40bn; €30.4bn; £27.3bn), and the organisation predicts it will expand by around 40% in rural areas this year, compared with a 25% upturn in urban centres.

As previously reported, Procter & Gamble and Coca-Cola are among the brands in this sector which have expressed their optimism about enjoying strong growth levels in the country in 2009.

The retail market in India is also said to be worth approximately $280 billion, with rural areas contributing some $112bn of this total, a proportion that is expected to increase substantially in the next four to five years as penetration levels rise.

While the lack of sufficient infrastructure has restricted the automotive sector thus far, Hyundai, the auto marque, estimates that “almost 50 per cent of the 220 million households in rural India are potential car buyers", particularly for smaller vehicles.

Maruti Suzuki, India's biggest carmaker, currently receives 10% of its domestic generates from rural markets, amounting to some 32,000 units overall.

It has recently launched a marketing campaign targeting consumers in these areas, as has motorcycle market leader Hero Honda, which is hoping to cover 100,000 of the country's 600,000 villages with its latest communications effort.

Data sourced from Commodity Online; additional content by WARC staff