India to become world's 5th largest consumer market by 2030

In the coming years, macro-economic trends are expected to make India the fifth largest consumer market in the world by 2030, providing a big opportunity for retail and consumer goods sectors, especially FMCG, as per a recent KPMG-FICCI report.
The growth in India's FMCG and retail sector has been primarily driven by the increase in consumption brought about by economic prosperity, as a result of strong GDP growth post liberalization in 1991. A combination of growing income levels and rising urbanisation among over 1.29 billion consumers in India is expected to continue driving the increase in overall spending in the country.

However, the industry is making a few mistakes too. The report cites that despite being one of the world's largest agricultural producers for years, the level of food processing in India is among the lowest in the world.

There is also 40 per cent loss of food grain is reported annually due to inefficiencies in the agricultural procurement and supply; there is large demand potential but FMCG hasn't made inroads into rural India; and modern retail is absent out of tier 1 cities.

Let's just hope that with a new wave of consumerism, the cons will get diluted. The KPMG report signals a three-fold opportunity for the FMCG and retail sectors through Modi's 'Make In India' program, by reducing burden on imports and creating opportunity for exports, bringing about cost efficiencies in manufacturing and supply chain, and availability of skilled manpower.

The report also highlights the challenges in realizing 'Make in India'. It states that manufacturing for consumer goods sector can be revived on three pillars- raw material availability, Labour availability and cost competitiveness - three things India has, but lack of adequate infrastructure and a complex regulatory business environment can cost it dearly.

In a global survey conducted by the World Bank, India had dismal ratings on most of the key determinants of investment attractiveness such as starting a business, acquiring land, getting construction permits etc. In addition, India's perception in terms of corruption is also very poor, ranked at a low 85 out of 175 countries.

If these challenges are met in near future, export-oriented food and agri parks, as well as incentives for global FMCG companies to set up greenfield projects in India would help in making the country a regional FMCG manufacturing hub for South Asia, Middle East and Africa.