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Growth in Automobiles, BFSI, FMCG, Healthcare, Retail to fuel ad spends?

Growth in Automobiles, BFSI, FMCG, Healthcare, Retail to fuel ad spends?

Author | Collin Furtado | Monday, May 11,2015 8:53 AM

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Growth in Automobiles, BFSI, FMCG, Healthcare, Retail to fuel ad spends?

Optimism still continues to flood the Indian market as growth prospects in the country remain high.

The World Bank recently estimated the Indian economy to grow by 7.5 per cent during the current financial year and is expected to grow at 7.9 per cent in FY2017 and 8 per cent for FY2018. Even the IMF has similar predictions of growth for the Indian economy (7.5 per cent) in FY2016. The Asian Development Bank (ADB) expected it to be 7.8 per cent, while the Economic Survey expects it to be 8.1 per cent.

We had earlier reported the expectation of growth in India to even outpace China by the end of the year by these global institutions. This is expected to be mainly on the back of pro-growth policy reforms, the increase in investment in the markets and lower oil prices. Though these are larger undertones of the economic growth of the country, there are also various industries and sectors that will be expected to contribute to this growth. The Central Statistical Office (CSO) says that the GDP for FY2015 is US$2,077 billion. This expected to grow further in the coming year too.

Some of the sectors that will see growth in FY2016 will be industries such as automobiles, BFSI, Chemicals, FMCG, Energy, Healthcare, IT, Infrastructure, Pharmaceuticals, Retail and Telecom according a report by Accenture called India in FY2016.

Some of the growth drivers for the automobile industry will be by the substantial investment put in by domestic automobile companies to increase their capacity in order to cater to the rise in demands. Similarly, a number of automobile companies around the world are looking to invest in this industry in India. Also, stable or low fuel prices are expected to fuel the demand in this industry.

In the Banking, Financial Services and Insurance (BFSI) sector, the growth will be fuelled by the entry of new players such as Infrastructure Development Finance Company (IDFC) by October 2015 and Bandhan Financial Services, which is expected to start operations within this year. Apart from this, the government’s new aim is to provide financial inclusion by opening 200 million new bank accounts by August 2015. Another 30 million new bank accounts will be opened by micro financing companies. This will definitely lead to more revenues and growth in this sector.

One of the biggest industries to fuel the growth in the Indian economy will be Infrastructure. Some of the key points which will contribute to the growth include SEBI allowing foreign venture funds to invest infrastructure projects, disinvestment and privatisation in Infrastructure companies which is expected to further fuel the growth and add funds and bonds to raise investment.

FMCG is another industry which is expected to push the growth higher. This growth will be based on interest rate cuts, which is expected to fuel consumption due to more disposable income. International players are expected to stay focused on the Indian market and invest more funds to stay competitive.

The Energy sector will fuel the growth through high investment attraction towards renewable power production. Companies such as GE have already invested in two wind farms in India. New oil and gas production facilities are expected to become operational soon. This will see a substantial amount of investment being put by many companies.

The retail sector is expected to grow faster even on the back of the ecommerce industry. The Indian ecommerce industry is expected to reach Rs 1.2 trillion in 2015 recording to CAGR of 37 per cent since 2013. The investments and growth of existing ecommerce players such as Flipkart, Snapdeal and Amazon are expected to continue to grow. In fact, India is expected to become the first economy to touch Rs 62.5 billion (US$1 billion) in online sales. Even the traditional retailers are expected to increase investment and efforts in starting off their own e-tailing business alongside the brick and mortar stores.

Many global apparel players are looking at the Indian market as one of their biggest revenue sources. This will see them invest more in their business.

Telecom companies are one of the fastest growing organisations in this country. The growth of telecom companies will be on the back of the launch of faster mobile data services. India is already the third highest in terms of number of internet users in the world and this growing at a faster than ever pace.

With smart phone penetration increasing, internet penetration is also expected to increase through these devices and so will the data consumption. By 2017, the total revenue of the mobile services market is expected to grow at CAGR of 5.2 per cent and reach Rs 2.3 trillion (US$37 billion).

The 3G subscriber base could also reach to around 68 per cent. There will also be the rollout of 4G, which is expected to bring down 3G rates. The government is also expected to improve pan-India connectivity.

The growth of sectors such as automobile, BFSI, FMCG, retail and telecom can lead to higher ad spends during this year as these are industries that usually spend big on media. In fact, apart from FMCG, retail and telecom, spends from automobiles and BFSI had been subdued. However, this is expected to change with the growth trajectory they are already experiencing. These sectors especially are directly targeting consumers and hence, we can expect them to spend more on marketing and media spends in the current financial year.

However, industries such as Energy and Infrastructure may lead to lesser media spends in comparison but nevertheless, energy brands as well as infrastructure brands used to spend a lot on corporate advertising earlier. There can be a comeback of advertising of energy and infrastructure companies during this year.    

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