India likely to opt for premium goods

Mumbai: The rise in per capita income and exposure to global lifestyle and brands has led to a shift towards ‘premiumisation’ in the consumer goods industry.

India’s luxury goods market, which is likely to reach $30 billion in 2018, is expected to continue to grow at 25-30 per cent over the next few years.

“Although strictly luxury goods may still be affordable only to a few ultra-rich households, the premiumisation trend is growing and is influencing multiple categories including electronics, durable goods, footwear, transportation, and even regular staple or FMCG food items. People in India are increasingly looking to switch to better products such as inverter air conditioners (AC), fully automatic washing machines and premium smart phones, among other such goods,” said Jitendra Gohil, head of India equity research, Credit Suisse Wealth Management.

According to Credit Suisse, India is on the verge of experiencing a consumption boom given 33 per cent of India’s population now resides in urban areas and around 65 per cent of the country’s 1.4 billion population is below 35 years of age. India has the highest number of millennial population, and given the increasing access to smartphones and internet, consumer behaviour is fast changing.

“We believe the biggest beneficiaries of these trends would not only be consumer discretionary companies in sectors such as retail, food, auto, travel and tourism, luxury, and entertainment but also companies that help address changes in investment and credit habits,” Mr Gohil added.

Noting that the penetration of consumer durables remains abysmally low in Indian households compared with other countries, Credit Suisse said the market has ample scope for growth given rising disposable income, increasing affordability, changing lifestyles and supportive regulatory changes, that is attracting foreign brands and capital.