Trend Watch 2017: Digitization, Rural Growth and Global Ambition Shape India

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By Kunal Sinha

This article outlines trends set to shape India’s marketing and advertising landscape in 2017, including government-led
digitization initiatives, increased product demand in rural areas and homegrown brands with global ambitions.

  • The government has set a target of Rs 2500 crore digital transactions for the year 2017-2018: currently, just 1.5 million merchants out of an estimated 60 million accept any form of electronic payment.
  • Massive spending through rural welfare schemes will see substantial demand emerging from tier II and III towns, as the government focuses on enhancing agriculture income, personal hygiene and sanitation.
  • In 2017, expect widespread adoption of OTT (over the top) content as the primary medium of entertainment content in India.
  • More than 65% of India’s 450 million internet users are mobile-only, and the country is adding 6 million new internet users
    every month.

2016 was a year of upheaval for much of India. Radical policies from central government such as the introduction of a common Goods and Services Tax (GST) and demonetization of 86% of the country’s paper currency value took precedence, against a backdrop of Asia’s economic slowdown and international political upheaval.

The biggest change from previous Indian regimes, and one that will directly impact India’s businesses, is that the Modi government is now actively pushing economic and social change. GST will stimulate economic growth – the expected GDP growth that could be attributed to GST directly is between 1.5-2 percentage points. The new tax does, however, impact brands with regards to price-setting at a time when demonetization has seen Indians with less money in their pockets.

Growing India’s digital economy

Everyone – from the central government to small shops and consumers – is being pushed to embrace the digital economy.
Currently, just 1.5 million merchants out of an estimated 60 million currently accept any form of electronic payment. While demonetization has spurred a surge in digital payments, there is still a long way to go before it’s considered mainstream.

The government has set a target of Rs 2500 crore digital transactions for the year 2017-2018. Banks have been tasked with deploying 1 million new Point of Sale (POS) terminals by March 2017; a new payment system called Aadhar Pay will be introduced, enabling 2 million merchants to facilitate digital payments even for users who don’t have a mobile wallet, debit card or smartphone.

Prime Minister Narendra Modi launched the Bharat Interface for Money (BHIM) app, which allows transfers directly to and from bank accounts. Within days of being launched, around 10 million people had downloaded and installed the app, with over 2 million transactions taking place.

State-run telco Bharat Sanchar Nigam Limited (BSNL) is leading the charge to set up 35,000 public WiFi hotspots by March 2018. The company aims to offer data services through these hotspots at speeds faster than those offered by current 4G technology.

Indian brands heading overseas
Buoyed by a trade push from the government, Indian firms are venturing into new markets.

FabIndia, the largest private retailers of ethnic clothing and traditional products such as foods and skincare, is making a move to take ayurveda and herbal tea to China. The company believes that there is a huge potential for Indian ayurvedic products, in spite of the hold of traditional Chinese medicine, as globally minded Chinese embrace new experiences.

Café Coffee Day is a market leader amongst coffee chains in India, with over 1550 outlets and adding 150 a year. In addition, 25,000 of its vending machines in 350 cities dispense a billion cups every year. But that is a minuscule amount – Indians consume just 85 grams of coffee on average a year. So, the company entered Austria – where people consume 8 kg of coffee every year – the Czech Republic and Malaysia. Eastern Europe made great business sense for the company since there is a vibrant coffee drinking culture without the fierce competition of the more mature Western markets.

Other brand owners are watching carefully, hoping that smaller, more nimble firms can get the kind of global recognition that India’s IT sector has already achieved.

Product demand to increase in rural areas

Massive spending through rural welfare schemes such as MNREGA and reduction in tax rate on basic income slab is expected to help drive demand for products. At the same time, the e-commerce industry in India is expected to grow from USD 30 billion in 2016 to USD 100 billion in 2020, according to the newspaper DNA (February 2, 2017).

“We see substantial demand emerging from tier II and III towns, as the government focuses on enhancing agriculture income, personal hygiene and sanitation. The focus on digital payment will increasingly shift consumers towards organized players,” according to Ullas Kamath, Joint Managing Director of Jyothy Labs, manufacturer of mass market brands such as Ujala fabric whitener, Henko detergent, Pril dishwashing liquid and Margo soap.

Skill development initiatives for the rural population have been designed to promote entrepreneurship in the hinterland. This is expected to put more disposable income in the pocket of the rural consumer, improve their standards of living and ensure continued rural demand for branded consumer goods.

An ambitious plan for rural electrification and solar power will generate demand for solar panels and electrical equipment. Expect the entire power sector to invest in building B2B and B2C brands as villages light up.

An app for everything

An exponential growth in mobile telephone adoption in India has led to a flourishing app-development ecosystem. The result: thousands of homegrown apps.

When thousands of people began lining up at ATMs across India to withdraw their money, only to come away disappointed as they ran out of cash, apps such as Cashnocash (launched by Quikr and Nasscom), CMS ATM Finder (launched by CMS Infosystems – a firm which manages 55,000 ATMS across India), Nearby, ATM Search (which offers updates based on crowdsourced data) began springing up to inform them which ATMs had cash.

The government has also launched an online education platform providing over 350 online courses prepared by some of the country’s best educators, free of cost. This is expected to boost self-learning in rural areas.

But it’s not just the government that recognizes the need. Teenager Roshani Shaikh designed the Padhai app, which helps illiterate children who cannot go to school because of extreme poverty to learn Hindi, English and Maths, and know when to call a doctor.

Makemytrip is one of the most popular apps Indians use to plan their travel – offering exclusive discounts to users, Gaana, a onestop shop for music lovers offers unlimited access to Bollywood and regional songs for a paid subscription of Rs. 99 per month; Flipkart and Snapdeal will continue to compete for mobile users’ attention and use in the e-commerce space against Amazon, just as Hike – which offers free calling, online / offline messaging and stickers, will find more Indian fans.

Hunger for content

In 2017, expect widespread adoption of OTT (over the top) content as the primary medium of entertainment content in India. More than 65% of the 450 million internet users are mobile-only, and the country is adding 6 million new internet users every month. According to iCube, by 2020, India will have 700 million smartphone users. Already, the country is the second largest mobile market behind China.

The OTT video streaming market is being served by at least five local players. Amazon Prime, which began streaming in India in December 2016, has just invested Rs 500 crore to create original content in India, investing in the production houses of top filmmakers like Farhan Akhtar and Anurag Kashyap. HotStar, ErosNow and SonyLiv have investments of around Rs 400 crore each. Viacom’s Voot gets 5-7 million viewers for each of its shows, with at least 2 million people logging in every day for 50 minutes of show time.

For advertisers, targeting this type of content could be beneficial in the year ahead.

For India, the defining feature of the marketplace in 2017 will be change. Those brands which are able to anticipate the impact of change, perhaps aided by an understanding of some of the trends outlined above, will succeed. With elections in progress in several states, including India’s most populated and politically significant state Uttar Pradesh, marketers will be hoping that the drive towards a more modern, aware and connected India will remain undiminished.

This article first appeared on Warc on 28 February 2017

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Author: Kunal Sinha
Date: 28 February 2017

About the Author
Kunal Sinha has over 25 years of unearthing and commenting on consumer and cultural trends, and helping companies profit from them. Based in Shanghai for nearly a decade, he is the author of two books about creativity in business: China’s Creative Imperative, and Raw – Pervasive Creativity in Asia, and has taught at some of the world’s leading business schools. He has won WPP’s top award for original thinking in the marketing services, the Atticus Grand Prix, thrice; his views and insights have been published in leading global media including the New York Times, Die Welt and The Daily Telegraph.

He is an Associate Fellow at the Institute on Asian Consumer Insight, Singapore.

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