Consumption – An Evergreen Theme in India

Consumption - An Evergreen Theme in India

Have you ever wondered if it is possible to turn your spending into wealth creation opportunities? Sounds counter-intuitive, doesn’t it? How do you manage to spend your money and grow wealth in the process? One of the most optimal ways of benefitting from the consumerist mind set prevalent today is to invest in the underlying consumer growth story – an everlasting theme if ever there was one. As one of the fastest growing large economies supported by a stable governance structure, India is at the forefront of the global growth opportunity, with the economy expanding at a steady rate. While the country is currently the sixth largest economy in the world, a recent HIS Market report stated that India will likely overtake Japan as Asia’s second-largest economy by 2030 and surpass Germany and the UK to rank as world’s No.3 in the next seven years. As the new growth engine of the world, India offers tremendous potential for investment and consumption is likely to be an overarching theme in the years ahead.

Why Should You Focus on Consumption?

One of the biggest reasons to focus on consumption as a theme is the fact that, over the years, Indian private consumption has grown faster than the GDP. The comparatively lower interest rates, and easy access to consumer credit, ensured that Indians had the wherewithal to spend heartily, and this boosted consumption in the country. There is also a strong shift from saving to borrowing, with studies suggesting that the new age consumer is more keen on fulfilling purchasing needs than saving up for a rainy day. For the savvy investor, this mind set shift turns into an opportunity for astute investment, aimed at benefitting from the underlying consumption patterns.

Drivers of focus include aspects such as the increasing individual income, diverse population, consistent urbanisation and the advancement of technology. With technology making access and availability more seamless, Indians today are more keen than ever to stay ahead of the trends and spend money on status symbols. Information is rampantly available, and this has influenced the lifestyles of people, who are slowly but surely turning more aspirational. This has fuelled growth in sectors such as FMCG, consumer durables, healthcare, retail, auto, telecom, media and entertainment, tourism, paints and consumer electrical, among others, indicating the scope for returns on consumption-based investing. Further, the variety of sectors depicting the consumption trend also helps investors diversify optimally, making it a win-win solution.

Separately, India boasts of the largest millennial population, on a global scale, offering growth potential for consumer markets and retailers. Millennials have grown up in an increasing urbanized India with a healthy economic environment and therefore, they differ from previous generations in terms of their lifestyle choices, consumption patterns, significant need for convenience and brand preferences.

Taking the Next Step

Data shows that the consumption theme has outperformed Nifty 100 even during the most volatile phases of the market. This is led by the fact that consumption sectors manage to perform well even during periods wherein people choose to not spend money on other aspects. In this scenario, the best way to benefit from the everlasting theme of consumption is to invest in a mutual fund which offers you access to the opportunities inherent under the theme.

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