India’s economy is booming, even as markets across the globe tighten the reins in anticipation of an impending recession. For our Globalization Deep Dive, we talk to marketers about what’s keeping the consumer ecosystem so buoyant.
With inflation in many global markets reaching historic highs, governments are hiking interest rates and hunkering down for an anticipated recession. But in India, the sixth-largest economy in the world by GDP, the story is different.
Today, the Indian economy is seeing euphoria around ongoing growth across a range of sectors. In the aftermath of the pandemic, business in consumption-led categories is booming. Plus, the upcoming festive season is ushering in good tidings for many consumption-led categories.
“India will be the shining star of a global economy that faces a decade of volatility amid war, inflation and supply chain disruptions,” said Christian Sewing, global chief executive of Deutsche Bank, in a recent interview with Indian business daily The Economic Times. A lot of countries – in particular European ones – are looking at India and seeing a real opportunity, he added.
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An insulated economy
Harish Bijoor is a well-known business and brand strategy consultant. He remembers that “recession rumbles had started in the US market as early as May and June, with the UK and other European countries following.” In India, though, he says the market that is triple-insulated, which makes it a more nuanced ecosystem and creates a layered impact business-wise across the three clusters.
There is the rural market, which is distanced by clear geographic clusters that depend on the rain and its bounty – agricultural India. Then there is ‘Tier 2’ India, which is made up of smaller towns and depends largely on businesses that link both the rural hinterland and the big city markets. And finally, there is urban India, which today represents almost 34% of the population and is divided into three classes: upper, middle and lower-income groups. Out here, the bite of inflation, high prices, lower incomes and job losses are most visible.
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A post-pandemic rebound
Aviation and hospitality were two of the worst-hit sectors in the pandemic, due to sealed borders and reduced travel opportunities. Now, however, the sectors have seen a sharp resurgence, with many new hotels opening and airlines introducing new routes. Indian aviation is seeing the launch of two new airline brands as well: Akasa Airways has already started operations, while the once-beleaguered Jet Airways has announced its relaunch plans under new ownership. Existing players like IndiGo and the Tata Group-owned Vistara are also on a roll, with business and leisure travel both back with a vengeance.
Says Deepak Rajawat, chief commercial officer at Vistara: “The industry is eagerly looking forward to the upcoming festive season as it comes at a time when travel restrictions have been largely eased in India and most parts of the world, and the travel demand is now at its peak.”
In the domestic segment, it has also ramped up frequencies on existing routes while introducing several new routes in line with the growing demand, with the most recent launch of operations connecting Mumbai with Jaipur and Abu Dhabi, as well as enhanced frequency to and from Frankfurt and Paris, he shares.
Amanpreet Bajaj, Airbnb’s general manager of India, Southeast Asia, Hong Kong and Taiwan, also believes that the upcoming festive season will fuel the travel plans for Indian travelers as it presents an opportunity for revival. To continue creating unique experiences for its guests, the brand has updated its platform and introduced tools such as ‘I’m flexible’ and ‘spilt stays’ over the past year, which have made it easier for locals across India to become hosts and share in the benefits of this tourism dispersal, adds Bajaj.
Interestingly, searches by international guests for Airbnb stays in India have increased by more than 60% year-over-year from Q1 2021 to Q1 2022, says Bajaj, suggesting that the travel industry is once again spurring economic recovery for the country.
The resurgence is visible in in-home consumption as well. The paint category, for instance, is a sharp indicator of consumer propensity to spend on their homes and offices. Asian Paints, the country’s largest paint and home decor company, is gung-ho and expects a surge in all home businesses. “The intense fervor of festivals makes the bond of decorating the home far stronger from a social-standing point of view and hence is fueling demand and consumption,” says Amit Syngle, Asian Paints’ managing director and chief executive.
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A major moment for e-commerce
Another sector that tends to surge around the festive time is e-commerce. Online marketplaces often hold up to three sales leading to the festival. The first wave of festive sales – which includes Flipkart’s ‘Big Billion Day Sale,’ Amazon’s ‘Great Indian Festival,’ Meesho’s ‘Mega Blockbuster Sale’ and sales on platforms like Myntra, Ajio and Nykaa – is usually the largest and often accounts for more than 50% of the sales during the festive period, according to Redseer Strategy Consultants.
Meesho, one of India’s fastest-growing e-commerce companies, posted its best festive sale performance during the recent five-day sale. Meesho launched in 2015 has a value proposition of affordability, with which it aims to democratize internet commerce.
Megha Agarwal, chief experience officer of growth at Meesho, says: “This sale saw nearly 60% of all orders came from Tier 4+ cities, reaffirming its unique selling proposition, along with small businesses on Meesho seeing significant growth during the festive sale event.”
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Another key theme of India’s unique economic story is the strong growth stemming from non-metropolitan towns and cities. Overall, seller participation in Meesho’s ‘Mega Blockbuster Sale’ rose four times from last year, with nearly 75% coming from Tier 2 markets and beyond. It’s a great case of localization that brands have to navigate in a market like India.
To better serve the growing user base from Tier 2+ markets, Meesho introduced eight new regional languages including Bengali, Telugu, Marathi, Tamil, Gujarati, Kannada, Malayalam and Odia. “Customers can now select their preferred language for accessing account and product information, placing and tracking orders, making payments on Android phones,” adds Agarwal.
“From portraying cultural nuances to colloquialisms, we are consistently reaching out to our audiences in their language of choice to drive brand preference,” he explains.
The overall mood is positive in India for now, says Bijoor, but “recession is a beast that travels slow, but travel it does – in a cascade.” Perhaps Indian marketers would do well to develop a plan B in the meantime.
For more on what marketers and their partners need to do to succeed on a global level, check out The Drum’s Globalization Deep Dive.