Page 110 - Nuvama | IC Report 2023

• MANUFACTURING • NEW ENERGY • URBANISATION • CONSUMPTION PREMIUMISATION • EQUITY SAVINGS CULT

Indian households retain debt capacity
Indian households have indeed levered up in recent years. Even so, the indebtedness is not very high.
Household debt to GDP in India is still lower than peers. And with incomes and affordability set to
improve, we argue India’s rising young and aspirational consumers, who do not have frugal attitudes like
their predecessors, are likely to borrow even more to support their lifestyle upgrades. This shall sustain
rising consumption of premium goods and services for a long time.
In fact, in the United States, it was the combination of unclogged banking system post-savings and loan
crisis, Reagan’s reforms and low household debt that spurred household consumption for decades.
80 77 75
Exhibit 6:
Household debt 70
in India is still
quite low 61 59
vis-a-vis peers 60

50 47
(%) 40 37
34 34
30

20 17

10
0
US DM China EU EM India Brazil South Africa Indonesia

Household debt to GDP
Source: BIS, Nuvama Research
Premiumisation trend in India

The trends in premiumisation are already visible in some categories such as FMCG and automobiles.

FMCG in flux
Many companies have undertaken multiple initiatives to upgrade their consumers. In fact, premiumisation
is clearly at play in FMCG. While detergents, for instance, are a highly penetrated category, Indian
consumers are upgrading to liquid detergents and have also started using complementary products
such as fabric softeners. These are premium offerings compared with powdered detergents.
At the same time, new and premium categories have seen emergence of innovative products such
as peanut butter in the spreads segment. A decade ago, no more than two–three brands (Sundrop,
Funfoods) offered peanut butter in India. In recent years, this category has exploded with several food
majors – Kissan (HUL), Marico, Amul and Dabur – foraying into the segment.
In this regard, HUL is an exemplar. The company is setting goals to upgrade customers from a mass-
level product to a more premium product across multiple categories ranging from Beauty & Personal

108