Agri-Food Consumer Profile
India

May 2011

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Executive Summary

  • Despite the fact that India occupies only 2.4% of the world's land area, its 1.2 billion people represent over 15% of the world population.
  • India is the world's fourth largest agri-food producer. However, the country is not self-sufficient in agricultural production.
  • Close to 80% of India's population practices Hinduism, meaning consumers do not eat beef and usually follow a vegetarian diet.
  • Although India's urban market only represents 1/3 of the total population, it is continuously growing with income per capita rising. The urban population is concentrated in several mega cities, whose diversity will provide several opportunities to Canadian exporters.
  • Despite lacking the image of India's urban areas, India's rural market consists of approximately 790 million consumers, and is expected to be worth US$425 billion in 2010-2011.
  • Increasingly hectic lifestyles coupled with urbanization have led to a transformation in the tastes of Indian consumers, with consumers increasingly influenced by Western ways of life, resulting in a change in consumer trends.
  • Vegetables accounted for more than 24% of Indian food expenditure, followed by bread and cereals, and milk, cheese and eggs.

Overview

Reforms carried out in the early 1990s liberalized India's economy, allowing it to become a major global player. Since it is not export-reliant, the country did well in weathering the global financial crisis, with a growth rate of 5.7% in 2009 and 9.7% in 2010. Major centres of economic activity include Andhra Pradesh, Maharashtra, Rajasthan, Haryana and Punjab.

Indian consumers are experiencing increasingly busy lifestyles and rising incomes, making them an important emerging consumer group. Urbanization has caused new trends in consumption, as urban metropolises are more influenced by Western ways of life. This newly aware consumer base presents several opportunities for Canadian agri-food exporters.


Economic Snapshot

  • India has the 5th largest GDP in the world, at US$1.4 trillion. GDP is projected to continue increasing through 2011.
  • Despite possessing one of the highest GDPs in the world, India has a low GDP/capita ofUS$1,264.84 and a high unemployment rate of 10.8%. However, GDP/capita is expected to grow along with India's economy.
  • India's growth rates were not significantly affected by the global financial crisis. In 2010, the country saw growth rates of 10.4%. Growth is expected to decline to 8.3% in 2011, and then stabilize around 8% annually until 2015.
  • India also sustained high inflation rates in 2010, of 13.2%. This is expected to decline to 7.5% in 2011, and to stabilize at approximately 4% annually until 2015.
  • India has a large current account deficit of US$44.1 billion. This is expected to increase, and remain around US$53 billion annually.

Demographics

Demographics (2010)
Population 1.2 billion
Population Growth 1.3%
Age Structure 0-14 years: 29.7%
15-64 years: 64.9%
65 + years: 5.5%
Median Age 25 years
Life Expectancy 67 years
Urban Population 30% total population
Urban Population Growth 2.4% annually
  • India is the second most populous country in the world, after China, accounting for over 15% of the world's population (1.2 billion people).
  • Approximately one third of India's population lives in urban centres, a number that is expected to grow by 2.4% annually.
  • The rural market in India consists of approximately 790 million consumers, with total rural income expected to reach US$425 billion in 2010-2011.
  • India's labour force was estimated at 478.3 million in 2010. Close to 60% of these workers are employed in some type of agriculture.
Most Populous Cities in India (2010)
Rank City Population
1 Mumbai 13,830,884
2 Delhi 12,565,901
3 Bangalore 5,438,065
4 Kolkata 5,132,208
5 Chennai 4,616,639
6 Hyderabad 4,068,611
7 Ahmedabad 3,959,432
8 Pune 3,446,330
9 Surat 3,334,135
10 Kanpur 3,221,435
  • India has a relatively young population, with a median age of 25. Younger consumers are more open to imported food stuffs and Western ways of life, presenting a lucrative consumer base for Canadian exporters.
  • India's growing urban population is concentrated in several urban metropolises. Over 10 cities in India have a population of more than one million. As incomes in India continue to increase, these cities will show potential for an increased presence of imported food products.

Consumer Profile

  • Indian consumers represent a wide variety of tastes, as popular cooking products vary across the country.
  • Main staple foods in India include rice, potatoes, atta (whole wheat flour), and a variety of pulses. Tea is considered the national drink.
  • As close to 80% of Indians practice Hinduism, a large portion of the population is vegetarian, making vegetables the largest food category in India.
  • The processed food industry in India is becoming a particularly lucrative sector, as consumers opt for processed and packaged foods that require less preparation time.
  • Although consuming alcohol is prohibited by Hindus, wine is gaining popularity in India because of its perceived health benefits.

Urbanization

  • Increasingly hectic lifestyles coupled with urbanization have led to a transformation in the tastes of Indian consumers. Urbanized consumers are increasingly influenced by Western ways of life, resulting in a change in consumer trends.
  • Urban centres in India are experiencing increased awareness about health, causing demand for fortified and healthy products to rise.
  • Rising urbanization and income levels (particularly in urban areas) have caused increased demand for processed food, as it takes less time to prepare.
  • Frozen processed and packaged foods are being regarded as products of higher quality, and tend to be geared towards urban consumers, since rural areas lack the infrastructure needed to support these products.
  • In urban areas, more Indians are leading busy lifestyles and consequently have less time to devote to daily cooking. This has lead to an increase in the popularity of frozen and packaged food products.

Spending Habits

  • In the last five years, consumer expenditure on food, alcoholic and non-alcoholic beverages increased substantially. Looking forward, growth is expected to be unabated.
  • Spending on takeaway and ready-meals is an urban phenomenon, but is expected to spread to rural areas as companies expand.
  • Vegetables account for approximately a quarter of Indian food expenditure, followed by bread and cereals, and milk, cheese and eggs.
  • Indian consumers purchase fresh food from wet markets and open-air stalls situated close to their homes. Coupled with the low penetration of refrigerators, it is common to purchase groceries, especially fruits and vegetables, on a daily basis.
  • The internet is not popular in terms of food shopping, as Indians prefer a tactile and sensory approach to purchasing.
  • Urban consumers in India look for "value for money", while rural Indians are extremely price sensitive and look for the cheapest available option.
  • Cereals and cereal substitutes are widely consumed in rural areas, as they are cheaper than fruit and meat, and accounts for 38% of rural monthly household spending.
  • Urban homes, which have higher disposable incomes, consume a variety of meats, fish, eggs, processed food and fruits.
  • The majority of organic food produced in India is exported because of low consumer awareness and affordability of organic food.
  • A large portion of family income in both urban and rural areas is spent on alcohol. The amount spend on alcohol does not differ substantially between rural and urban households, with total expenditure on alcoholic beverages increasing over the last five years.
  • Indian consumers, especially those living in urban areas, are willing to pay more for luxury goods and premium imported food items. The luxury market in India is expected to grow by 21% in the next three years.
  • Indians consider it important to save, particularly for their children's education. Approximately 34% of monthly income goes to savings.

Retail and Distribution

  • Supermarkets are growing in popularity in urban India, as they are a convenient location for consumers to fulfill all their shopping needs.
  • The retail food market is the fastest growing retail segment in India. India is expected to become the fourth largest food retail market in the world by 2020.
  • However, the Indian retail scene continues to be dominated by traditional grocery stores, as they are frequented more often by Indian shoppers. Independent small grocers account for more than 80% of the retail channel sales.
  • India's hypermarkets were not affected by the economic recession; in fact they flourished, with sales increasing substantially in 2009 and numbers of hypermarkets increasing considerably.
  • Approximately 20% of the products carried by retail chains are imported.
  • Paan shops (mini department stores) sell various products and food items, including fresh fruits and vegetables, and are mainly geared towards low-income urban dwellers and on-the-go shoppers.

Foodservice

  • The growing population of young people in India are becoming more open towards foreign foods, which is resulting in a significant expansion of fast food chains.
  • Higher disposable incomes and increasingly hectic lifestyles have resulted in more Indians dining out. Consumer expenditure on foodservices increased 30% between 2005 and 2009.
  • Fast food consumption in India has been rising, mainly in urban areas. Pizza outlets have become particularly popular in this category.

Import Situation

  • In 2009, India imported $291.0 billion worth of goods, $12.8 billion of which were agricultural in nature. Agricultural imports accounted for close to 4.4% of India's total imports.
  • India's major agricultural import sources include Indonesia, Brazil, Myanmar, Malaysia, the United States and Canada.
  • India's urban population is growing quickly, and demand for food will outweigh supply, making India a major agri-food importer. Presently, imports meet just 3% of Indian food demand.
  • Despite ample opportunity, food product imports into India are heavily controlled, with high tariffs and complex food laws presenting barriers to trade.

Canadian Position

  • Canada is India's 6th largest agricultural import source, and India is Canada's 9th largest agri-food export market. Total agricultural trade between the two countries in 2010 was $636.3 million.
  • Canada's top five exports to India in 2010 included vegetables, which made up 97.2% of total agricultural exports, oil seeds and oleaginous fruits (1.3%), oil-cake (0.3%), rape, colza or mustard oil (0.2%) and ambergris, castoreum (0.1%).
  • The largest export category to India in 2010 was intermediate exports, with vegetables accounting for 99% of intermediate exports.
  • Canada's Global Commerce Strategy has identified India as a priority market for Canadian companies, as India has the potential to become the third largest global economy by 2050.
  • Canada is currently negotiating eligibility to export products such as seafood, pork, live cattle, live swine, poultry genetics and animal products into India, as several barriers to agricultural imports exist.

Opportunities for Canadian Exporters

Opportunities Canadian Advantage
Growth in milk and dairy product demand, as India is the world's largest milk consumer. Canada's dairy products are diverse, with strict quality standards assuring an excellent reputation. Canadian dairy exports to India have increased 143.7% since 2006, demonstrating the strength of Canadian products in the country.
A growing urban population whose demand will soon outstrip supply. In November 2010, Canada and India launched Free-Trade Agreement negotiations, which will further benefit Canadian producers in this market. Canadian exporters will be well-placed to fill this gap, especially in wheat and pulses.
Increased health awareness spurring demand for health products. Canada produces a variety of functional foods that rank among the worlds best in terms of quality, nutrition and taste. As one of India's principal trading partners, Canada will easily be able to enter this niche market.
India is the fourth largest edible oil economy in the world; increased income and population growth will accelerate demand for edible oils. As a significant trade partner to India, Canadian edible oil exporters will be able to increase exports in canola, sunflower and mustard oils to India. Canada was India's 3rd largest source of rape, colza, and mustard oil in 2009.

Key Resources

  • Agriculture and Agri-Food Canada. "India's Agri-Food Sector." 18 Jan. 2011. Keynote speech.
  • Agri-Food Trade Service. ‘Agri-Food Past, Present & Future Report: India." Agriculture and Agri-Food Canada. March 2011.
  • Canadian Agriculture Trade Statistics (CATS)-2010
  • Euromonitor International. "Consumer Lifestyles in India." Euromonitor International.
  • Global Trade Atlas. Global Trade Atlas. 2009.
  • Infoclick.in. "Most Populous Cities in India." infoclick.in. 14 Mar. 2011.
  • U.S. Department of State. "Background Note: India." U.S. Department of State. 14 July 2010.