India: Reaching the consumer

Consumer Profile

The population of India in 2022 is estimated at 1.406 billion according to the latest UN data. The largest city in India is Delhi, with a population of 32.07 million, followed by Mumbai with a population of 20.96 million (CIA, 2022). Overall, there are more than 50 areas India with a population of more than one million. While the number of Indians living in urban areas has increased over the past two decades, about 64% of the population still lives in rural areas (CIA). India is a vast country, marked by a great diversity of religions, languages, literacy levels, traditions, social customs and economic status. There are therefore several types of Indian consumers. There are five categories of Indian homes: elite, well-off, aspiring, future billionaires, strivers. The first two classes of income are those that grow the fastest. However, the largest consumption expenditure is concentrated on categories including people with undergraduate degrees (skilled employees), blue-collar workers and migrant workers. In India, these categories represent about 130 million workers with incomes of more than 3,200 USD per year on average. India struggles to educate and employ its growing population: over 28% of the country's young people are excluded from education, employment or training, while the vast majority of working Indians are employed in the informal sector (World Bank, 2020). According to the latest data from the World Bank, in 2018, India had a literacy rate of 74.4%: 82.4% for men and 65.8% for women. However, the literacy rate varies enormously from one state to another. India still has about a quarter of the world’s extreme poor, and social inequalities in the country are not only rampant but rising. The expansion of this category of population - both in terms of size and income - is expected to be the main driver of consumption in India over the next few years. Nevertheless rising incomes influence spending patterns in the various consumer categories.

Purchasing Power

Consumer spending across India amounted to over 23 trillion rupees as of January 2022 (Statista). India is expected to become the third largest consumer market by 2030. Fundamental changes in Indian family structure are a determining factor in consumption patterns: extended family gives way to nuclear homes - a couple or a single person, with or without children who tend to spend more. According to World Bank data for 2020, per capita GDP (Purchasing Power Parity) in India was USD 6,503.9, and Gross National Income per capita (PPP) was USD 6,440. According to the Gender Gap Index, in 2021 India has slipped to the 140th position from the previous 112th in 2020. Women’s estimated earned income is only one-fifth of men’s, and in terms of wages for similar positions, only 46%-49% of the gap has been closed (World Economic Forum, 2021).

Consumer Behaviour

Indian consumer behaviour is strongly influenced by the caste system that compartmentalises society. It creates social differences and makes it possible to strengthen bonds between people from the same social group.
Thus, a brand will be much easier to advertise via the recommendations of parents and word of mouth. In general, Indian consumers are attached to a particular brand, but are not exclusive. Indeed, they seek above all the added value of the purchase and the brand, more than its reputation. Companies wishing to reach as many consumers as possible must make significant efforts in terms of market penetration.
Indian consumers tend to buy fresh produce (dairy products, fruits and vegetables) at least every two or three days, an advantage for traditional "kirana" stores compared to so-called modern stores like supermarkets. There are over 15 million traditional “kirana” stores in India – 90% of the retail market (USDA). In recent years, rural consumers have grown in importance. Broader Internet access is driving a growing demand for streaming services as well as significant growth in e-commerce. The country already has the second-largest internet population – and only 47% of citizens are online (Data Reportal, 2022). Big brands are already investing in Indian expansion. eCommerce is new to many Indians, particularly outside the big cities. Programs like Amazon Easy are connecting traditional stores to the eCommerce sector. Kirana shops can act as delivery points or help customers place orders.
The shared economy has undergone a tremendous development in India and has grown exponentially in the past five years. Services like MERU Cab are used as an alternative for Uber or BlaBlaCar.

Consumer Recourse to Credit

Credit financing is becoming less and less popular in India, especially in urban areas as most households would prefer to buy with their own income. Nevertheless, the use of credit cards in India has been steadily increasing in 2017 partly due to the demonetisation decision declared by the Indian government in November 2016. As a result, and because of the demonetisation, a large number of retailers have started to accept card payments.
As a result the use of credit cards by Indian consumers has increased as has the frequency of use of their cards regardless of the amount.  The number of credit and debit cards in India is steadily increasing but debit card issuance exceeds credit cards. According to the Reserve Bank of India, a total of nearly 31 million credit cards and 880 million debit cards were in service in May 2017.

Growing Sectors

Infrastructure, financial services, ICT, automotive, health, transport and hotels, real estate, education services, production, distribution of electrical energy, machinery and equipment, water and clean energy, franchise and retail.

Consumers Associations

Consumer Advice Company for India

Population in Figures

Total Population:

1,417,173,173

Urban Population:

35.9%

Rural Population:

64.1%

Density of Population:

473 Inhab./km²

Men (in %)

51.8%

Women (in %)

48.4%

Natural increase:

0.68%

Medium Age:

24.0

Ethnic Origins:

There are hundreds of ethnic groups in India, dominated by the Indo-Aryans (Assamese, Bengalis, Punjabi, Koli, etc.), who make up 75% of the population, and the Dravidians (Tamils, Kannadigas, Malayalis, Telugus, etc.), who account for about 20%. The Austro-Asian, Sino-Tibetan, Tai-Kadai and other ethnicities account for about 5% of the population. (Ministry of Statistics)

Population of main agglomerations

Source: Citypopulation.de, Latest available data.

Age of the Population

Source: World Bank, Latest data available.

Consumption Expenditure

Media in Which to Advertise

Television

Expensive but the most popular media of advertising in the country. Nearly 70% of the households in India have TV sets, which represent over 180 million households with a TV set, many of them using satellite or cable. Doordarshan, the public TV, operates multiple services, including flagship DD1, which reaches hundreds of millions of viewers. Multichannel satellite TV has enjoyed a huge success in India. Major platforms Dish TV, Tata-Sky, Sun Direct, Big TV and Airtel Digital TV have millions of subscribers. In 2017, TV contributed 38.2% of the Indian advertising market. Traditional advertising spends will still remain strong in India. India is one of the few large markets where all traditional media platforms will grow. Television is expected to grow over 10.3%, with Free to Air (FTA) channels gaining significant ad spends (GroupM).

Main Televisions
Doordrashan
Star TV
Sony Entertainment TV
Aaj Tak
Sun Network

Press

According to the National Readership Survey (NRS), the print media reaches 70% of urban adults. Further, the number of readers in rural India is now roughly equal to that in urban India. There are approximately 12.000 newspaper titles in India. Newspaper circulations have increased due to a growing middle-class. Print contributes a significant portion to the total advertising revenue, accounting for almost 41.2%. In 2018, the print ad market may grow by over 5.7% with higher spends from automobile, telecom and education.

Main Newspapers
The Times of India
Madhyamam Daily
Divya Bhaskar

Mail

In India, mail-order companies are the main sector still using mail advertising, as mail has a higher cost per person reached than other forms of advertising (also due to weak postal services).

In Transportation Venues

Advertising space is available on rails, buses, taxis and other specialized mobile vehicles and is an effective promotion tool. The Indian Railways are working on a new advertising policy aimed at installing 100.000 big digital screens at 2.175 railway stations across the country. The OOH sector had an estimated growth of over 12% in 2017.

Market Leaders:
Times OOH

Radio

The least expensive and most traditional form of mass entertainment in the country. It reaches over 99% of the population. In 2018, the radio sector is likely to see a large growth of over 13%.

Main Radios
All India Radio
Radio Mirchi
Radio City

Web

There were over 462 million internet users in India in 2016 according to Internet LiveStats, which makes India the second largest online market after China. Internet advertising is growing although its reach is still low. Digital contributes 11% of the total revenue of the advertising market. Nevertheless, India’s digital advertisement market is expected to grow at a compound annual growth rate of 33.5%, reaching USD 3.8 billion by 2020, according to IBEF (Indian Brand Equity Foundation).

Market Leaders:
A list of advertising agencies in India

Main Advertising Agencies

JWT (Hindustan Thompson Associates)
Ogilvy & Mather
Saatchi & Saatchi Pvt Ltd
DDB Mudra

Main Principles of Advertising Regulations

Beverages/Alcohol

Advertising alcoholic beverages has been banned in India as per the Cable Television Network Regulation Amendment Bill which came into effect in 2000. Private channels often permit alcohol companies to advertise using surrogate means like selling the brand name for soda or water or music (“surrogate advertisement”). The excessive pressure of the ban forced companies to focus more on brand building and thus liquor companies started sponsoring and hosting glamorous events, yet many others started distributing t-shirts, caps, key chains, drinking glasses with the brand name displayed on these products. Lately, social media proved to be an ideal promoting platform for these sectors.

Cigarettes

Advertising tobacco products through most forms of mass media is prohibited. The Cigarettes and Other Tobacco Products Act, 2003 (COTPA) is the principal comprehensive law governing tobacco control in India. Refer to TobaccoContolLaws for further info.

Pharmaceuticals/Drugs

In India, the system of regulation for the advertisement of drugs is provided in the Drugs and Magical Remedies (Objectionable Advertisements) Act of 1954, which states that the publication of any advertisement referring to any drug in terms which suggest or are calculated to lead to the use of that drug for the diagnosis, cure, mitigation, treatment or prevention of any disease, disorder or condition specified in the schedule or rules of the Act are prohibited in India. Consult the pharmaceuticals advertising guide from ICLG.

Other Rules

Restrictions of direction/attitude are placed on children's commercials. No baby food advertising is acceptable. Overseas commercials are accepted.

Use of Foreign Languages in Advertisement

Generally English, Hindi and all regional languages are used.

Organizations Regulating Advertising

Advertising Standards Council of India
Advertising Agencies Association of India (AAAI)