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Rural households present big opportunity for consumer firms 

CNBC TV18 , Oct 10, 2018

Rural households, accounting for 68 percent of the country's population, present a very promising opportunity for companies operating in the consumer segment, a report said.

These companies have multiple opportunities to conduct business in the country on the backdrop of a growing economy and favourable factors driving consumerism in India, the joint report by Deloitte and FICCI titled 'Consumer LEADS' said.

"Rural households contribute to approximately 50 percent of the GDP, 40 per cent FMCG sales, 50 percent two-wheeler sales, 30 per cent four-wheeler, and 45 percent telecom contribution," the report said.

It expects better accessibility, better affordability with more non-agrarian jobs, and greater awareness with Internet penetration to continue to drive the growth in rural markets.

The report noted that the overall consumption is on the upswing, with per capita income expected to increase 10.2 percent to Rs 2,66,500 by 2025. It expects the discretionary spending to also increase to 45 per cent in 2025, from 35 percent presently.

Increasing households with reducing household size is also expected to increase the demand, according to the report. Rajat Wahi, partner, Deloitte India, said, "Healthy growth of the Indian economy (real GDP growth rate of over 7 percent estimated for 2018) coupled with favourable demographic factors in the country are expected to drive growth in the retail, CPG (consumer packaged goods) and e-commerce industries."

While the retail industry is forecasted to grow at a CAGR of over 10 percent in the four-year period, from $ 795 billion in 2017 to reach $ 1,200 billion by 2021, the e-commerce market is predicted to increase by over 30 percent over the same period to reach $ 80-120 billion in 2021, from the current $ 24 billion, according to the report.

"Organised retail market will constitute nearly 20-25 percent of the overall retail market by 2021, up from current share of 10-12 percent," said Wahi.

The report also noted that technology is expected to transform consumer markets through major disruptions and evolutions, augmenting the overall growth of retail, CPG and e-commerce segments.