Boston, MA -- (ReleaseWire) -- 04/14/2014 -- # An emerging middle class and an expanding 21-plus years age group resulting in a strong rise in household spending across all retail subsectors means that India's retail sector is forecast to grow strongly over the next few years. We are particularly positive about the future growth prospects for communications, personal care & insurance, and clothing & footwear spending. However, we expect food and drink expenditure to remain the highest throughout our forecast period, with spending on transport and housing also high.
The new India Retail Report provides an extensive forecast of various retail indicators, including household spending and headline total spending across each retail subsector, household income and employment forecasts, demographic forecasts, and a detailed breakdown of household and per capita spending across a large number of retail areas including food & drink; clothing & footwear; furnishing & home; recreation & culture; personal, insurance & other, and a number of other subsectors.
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Overall, we see long-term potential in the local consumer market, particularly for non-essential items and aspirational purchasing by an emerging middle class. We forecast the average net household income to be US$6,725 in 2014, with the great majority of households falling into the bottom wage bracket of US $5,000+. However, between 2014 and 2018, the percentage of households in the US$10,000+ wage bracket is forecast to rise from 10.0% to 25.6% of the total, which represents the key demographic for increased household spending on luxury items beyond necessities such as food, utilities and transport. We expect this to result in a corresponding increase in household spending on personal care and effects, high-end household appliances, restaurants and entertainment. Meanwhile, transport expenditure will also continue to rise as a larger number of households purchase cars and bikes and travel longer distances, including the purchase of holiday flights.
However, starting with the sell-off in the rupee, economic headwinds have accumulated quickly in India, forcing us to downgrade our real GDP growth expectations. The rupee's performance and the harsh response it has forced the central bank to enact suggest to us that private domestic demand will be much weaker than previously anticipated. We now see full-year real GDP growth remaining flat at 5.0% for FY2013/14 (April-March).
Recent Developments Include: The UK's Tesco has received the go-ahead to invest US$110mn in a joint supermarket venture with the Tata Group conglomerate. The newly elected Delhi government led by the Aam Aadmi Party has been widely criticised for its withdrawal of approval for foreign direct investment in multi-brand retail in Delhi. TUI Travel India has opened its sixth retail store in India, and its first in Mumbai.
Key BMI Forecasts:
- We expect total household spending to be US$1,204bn in 2014.
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